Denver, CO - August 11, 2010 - A new law governing short-term consumer credit goes into effect today in Colorado. The law eliminates payday loans and, in their place, creates a six-month consumer installment loan product. The industry associations representing lenders that formerly offered payday loans in Colorado — the Colorado Financial Service Centers Association (COFiSCA) and the Community Financial Services
Association (CFSA) — issued the following statement regarding the new law:The new law that goes into effect today is the result of definitive action taken by the state legislature to eliminate payday loans in Colorado. HB 1351, passed with the urging of groups opposed to the payday lending industry, leaves over 300,000 consumers in Colorado without a onvenient, highly-regulated credit product that has been available to them for more than a decade. Moreover, the new law has already exacerbated economic hardship in the state with the closing of dozens of payday loan stores and the loss of at least 100 full-time
jobs with benefits.

Unfortunately, HB 1351 is yet another example of hasty, ill-conceived antibusiness regulation that limits consumer’s short-term credit options. The law allows lenders to offer consumers an installment loan of no more than $500 for at least a six month period, but eliminates consumers’ ability to take out a loan simply to bridge a cash shortfall until payday. In its present form the law offers consumers little but confusion and complexity, and offers lenders uncertainty in terms of a rational framework for implementation.

Our members have been working intently since HB 1351 was signed into law by Governor Ritter on May 25th to evaluate whether the loan product crafted by the legislature can be translated into a viable business model. We do not know if this installment loan will meet the needs of our customers, and we are concerned that its complex nature will negatively affect the simplicity and transparency they had come to expect with the payday loan product previously offered. As an industry that serves over 300,000 Coloradans a year, there is no question that the need for short-term personal credit remains strong, perhaps now more than ever given the deteriorating economy across our state and
country.

Over the upcoming months we hope to have a clearer understanding of customer response to the new product offering. We will continue working with state policy makers to refine the details of this new law in an effort to better meet the needs of consumers.

In the meantime, we will work to assure that the lenders who make up CFSA and COFiSCA operate in a fully compliant manner. About the Colorado Financial Service Centers Association: COFiSCA is the state trade association representing payday lenders in Colorado. COFiSCA’s primary mission is to bring a broad range of community based financial services businesses together with the goal of identifying industry best practices, improving customer satisfaction and establishing guidelines to assist members in complying with various state and federal regulations. COFiSCA members are dedicated to delivering valuable community based financial services to underserved consumers hroughout the State of Colorado.

For more information: www.cofisca.org

About the Community Financial Services Association of America: CFSA is the only national organization dedicated solely to
promoting responsible regulation of the payday advance industry and consumer protections through CFSA’s Best Practices. As
such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the
payday advance is a safe and viable credit option for consumers.

For more information: www.cfsa.net

FOR IMMEDIATE RELEASE Contact:
Dominic DelPapa
ddp@ikoninc.net
303-861-0223
08/11/10

Hundreds Rally against HB 1351 to save 1600 jobs

Denver, CO - April 27, 2010 - Customers, employees and supporters of the payday advance industry in the state will rally at noon on the west steps of the state capitol today to oppose HB 1351. Former Denver Bronco and two time Super Bowl Champion Willie Green, Director of Corporate Development and Community Outreach for Advance America, is emceeing the event, which will feature state legislators, payday advance employees and customers, and representatives from leading business groups. The bill would eliminate the payday advance industry in Colorado and with it 1,600 jobs and a valued credit option for over 300,000 Coloradans.

“Coloradans still oppose this bill, and for the same great reasons” said Ron Rockvam, president of the Colorado Financial Service Centers Association (COFiSCA). “The legislation is squarely aimed at putting the payday advance industry out of business, and with it the wide ranging contributions it makes to the state economy.”

The bill proposes arbitrary rate caps on fees payday advance companies can charge, which would render the industry incapable of operating in the state. The bill in its present form passed the state House of Representatives by only one vote.

“Nearly 20 community, business and labor groups oppose this bill,” said Tony Gagliardi, State Director of the National Federation for Independent Business. “If passed HB 1351 would kill sixteen hundred jobs and drain millions from the state budget and the bankrupt state unemployment insurance fund.”

Of growing importance to a number of lawmakers is the impact of the bill on the state’s bankrupt unemployment insurance fund. The fund technically went into default and was forced to borrow monies from the federal government in order to meet obligations to unemployed Coloradans. If passed, HB 1351 could result in as many as 1,600 lost jobs with a resulting $11,000,000 drain on the unemployment insurance fund.

“Bronco bustin’ is a Colorado tradition, but business bustin’ seems to be what the General Assembly members who support this bad bill are trying to do with this misguided legislation,” said Chris Howes, president of the Colorado Retail Council. “How can we afford yet another bill that puts people out of work and drains our state budget when we’re in the middle of an economic crisis?”

Over 300 people will attend the rally to oppose HB 1351 today. For more information visit: www.cofisca.org
Groups that have come out in opposition to HB 1351:
AURORA CHAMBER OF COMMERCE
BROOMFIELD CHAMBER OF COMMERCE
COLORADO ASSOC. OF COMMERCE AND INDUSTRY
COLORADO RETAIL COUNCIL
COLORADO SPRINGS CHAMBER OF COMMERCE
C3 - COLORADO COMPETITIVE COUNCIL
CHAMBER OF COMMERCE OF HIGHLANDS RANCH
DENVER METRO CHAMBER OF COMMERCE
FRUITA CHAMBER OF COMMERCE
HISPANIC CHAMBER OF COMMERCE OF METRO DENVER
HISPANIC CONTRACTORS OF COLORADO
INTERNATIONAL COUNCIL OF SHOPPING CENTERS
KREMMLING AREA CHAMBER OF COMMERCE
NFIB-COLORADO
NATIONAL ASSOC. OF INDUSTRIAL OFFICE PARKS - COLORADO (NAIOP)
SOCIETY OF HISPANIC HUMAN RESOURCE PROFESSIONALS
SOUTH METRO DENVER CHAMBER OF COMMERCE
TEAMSTERS LOCAL UNION No. 17 (CO & WY)
TEAMSTERS NATIONAL BLACK CAUCUS
URBAN LEAGUE OF METRO DENVER

About the Colorado Financial Service Centers Association: COFiSCA is the state trade association representing payday lenders in Colorado. COFiSCA’s primary mission is to bring a broad range of community based financial services businesses together with the goal of identifying industry best practices, improving customer satisfaction and establishing guidelines to assist members in complying with various state and federal regulations. COFiSCA members are dedicated to delivering valuable community based financial services to underserved consumers throughout the State of Colorado. For more information: www.cofisca.org  

 About the Community Financial Services Association of America: CFSA is the only national organization dedicated solely to promoting responsible regulation of the payday advance industry and consumer protections through CFSA’s Best Practices. As such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the payday advance is a safe and viable credit option for consumers. For more information: www.cfsa.net

Background
Proposed amendments to HB 1351 in no way change the ultimate effect of the bill, which is to eliminate payday lending in Colorado.

ORIGINATION FEES A DIVERSION. The proposed one-time annual limit of $10 per $100 for the initial loan only plus a 45% interest rate cap translates to an absolute maximum of $58.63 on a $500 loan, slashing revenue by 88% on every successive loan. No industry, including payday advance, can survive massive government mandated revenue reductions at this level.

INTEREST RATE CAP STILL MISLEADING. Whether 36% or 45%, using an interest rate cap as a regulatory mechanism for the payday lending industry misleads and misinforms. While the Federal Truth in Lending Law requires payday lenders to express their fees in an annual percentage rate, there is no interest charged on a payday loan; it is a fee-based product. This means that a $300 payday loan has the same fee regardless of whether it is a 14-day loan, a 30-day loan, a 15-day loan with a 60-day payment plan, or a defaulted loan that is paid off six months late.

45% RATE CAP STILL FATAL TO INDUSTRY. At a 45% rate cap, the revenue payday lenders can recover from a $100 loan jumps a whopping $.34, from $1.38 (at a 36% rate cap) to $1.72 (at the 45% rate cap) on a 14-day loan. The notion that any rate cap other than those currently imposed on the industry can somehow keep it viable is just false. Payday lenders operate on the edge of viability in Colorado’s current regulatory and economic environment. Any further state imposed restrictions on the operating environment would send the industry over the edge, and with it the economic contributions it makes to Colorado.
Economic Impact
The Colorado payday advance industry is a vibrant contributor to the overall Colorado economy.

ECONOMIC VALUE OF PAYDAY ADVANCE INDUSTRY IN COLORADO
2009 Study
• Direct Payroll / 1666 Full Benefit Jobs = $44,000,000
• Lease Revenue Paid to Landlords = $20,000,000
• Loan Volume = $639,000,000+
• Unemployment Compensation Liability to State = $13,000,000
• Value of Payroll Multiplier = $70,000,000

Extended Payment Plan
To address concerns about “a cycle of debt”, in 2007 Representative Benefield and Senator Tochtrop passed legislation requiring an extended payment plan for payday loan customers. It allows borrowers to extend repayment of their loan for up to six months at no additional cost. In other words, payday lenders are required to offer a no-fee, no-interest payment plan to every consumer with four or more consecutive loans. Date from the Colorado AG’s office show that 60% of those eligible for the payment plan take it, and 79% complete the payment plan without default. After implementation, the number of consumers who use a payday loan more than 13 times per year dropped by 45%. Now less than 6% of consumers need this level. The payment plan is free and the original loan amount never accrues interest. Furthermore, in 2008 the payday advance industry conducted 1.8 million transactions of which were overseen and audited by the office of the UCCC in the Colorado Attorney General’s Office. Of those 1.8 million transactions only 7 customer complaints were filed with our regulator.

Referred Measure
This issue is deceptively complex and subtle. It is not an issue that is suitable for the ballot. The extended payment plan is an example of how the Legislature can thoughtfully reform the product to benefit all rather than simply eliminate a valuable credit option.

We urge your opposition to the amendments to HB 1351. Help save Colorado jobs and an individual’s access to credit!

Please join these organizations in opposing this ban on payday lending in Colorado.

-Colorado Association of Commerce and Industry Colorado Retail Council
-Denver Metro Chamber of Commerce C3 - Colorado Competitive Council
-Aurora Chamber of Commerce NFIB - Colorado
-Urban League of Metro Denver Society of Hispanic Human Resource Professionals
-NAIOP - Colorado South Metro Denver Chamber of Commerce
-Colorado Springs Chamber of Commerce International Council of Shopping Centers
-Hispanic Chamber of Commerce of Metro Denver Hispanic Contractors of Colorado Teamsters Local Union No. 17 (CO & WY) Teamsters

-National Black Caucus

For more information please contact Jenifer Brandeberry, (303) 638-4420, Julie McKenna, (303) 898-8494, Jake Zambrano, (303) 378-2545 or Roberta Kirscht Robinette, (303) 618-8353

About the Colorado Financial Service Centers Association: COFiSCA is the state trade association representing payday lenders in Colorado. COFiSCA’s primary mission is to bring a broad range of community based financial services businesses together with the goal of identifying industry best practices, improving customer satisfaction and establishing guidelines to assist members in complying with various state and federal regulations. COFiSCA members are dedicated to delivering valuable community based financial services to underserved consumers throughout the State of Colorado. For more information: www.cofisca.org

About the Community Financial Services Association of America: CFSA is the only national organization dedicated solely to promoting responsible regulation of the payday advance industry and consumer protections through CFSA’s Best Practices. As such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the payday advance is a safe and viable credit option for consumers. For more information: www.cfsa.net

Denver, CO - February 21, 2010 - Legislation slated to be introduced Monday aimed at restricting payday loans in Colorado would shutter the industry, cause the loss of at least 1,600 jobs and pour salt on the gaping budget wounds plaguing the state. The Colorado Financial Service Centers Association (COFiSCA) and The Community Financial Services Association of America (CFSA), and the National Federation of Independent Businesses (NFIB),and the Colorado Retail Coucil (CRC) immediately announced their opposition to the bill.

The bill to be introduced seeks an end run around the legislative process by calling for a referred measure to be placed on the ballot this year that would impose interest rate caps on payday loans. The move represents the legislative version of a bailout for opponents of the industry who have not been able to pass their agenda to shut down the industry through the regular legislative process.
“Proponents of the legislation know full well that interest rate caps are tantamount to a back door ban on the payday advance industry,” said Ron Rockvam, President of the Colorado Financial Service Centers Association (COFISCA). “At least 1,600 jobs and millions in tax revenue would virtually disappear if this measure were to pass.”

Colorado’s payday advance industry includes over 500 stores with almost all located in the kind of small retail shopping centers that are struggling to hang on in the midst of a recession; the rental income paid on those stores represents as much as $20 million. If lost, the industry’s 1,600 jobs - the vast majority of which are full time and full benefit - would further devastate a state unemployment insurance fund that was forced to borrow money to remain solvent, and the $44 million in lost payroll money would deal a major blow to a state economy fighting to recover.

Over the past three years, anti-payday groups have sought to pass regulatory overkill of the industry in Colorado. Payday loans are already widely recognized as one of the most regulated and transparent personal financial products in the state. Over 300,000 middle-income Coloradans affirmatively choose payday loans each year over more costly alternatives to manage short term credit needs. The Colorado Attorney General reports that in over 1.8 million transactions only 7 complaints against payday loans were filed, clearly signifying overwhelming customer satisfaction with the industry.
“Opponents of the industry would rather not be confused by the facts,” said Rockvam. “We have an exemplary satisfaction record, provide sixteen hundred jobs and offer a highly regulated financial service that consumers need but can’t get anywhere else. Yet they still seek to eliminate the industry in Colorado through less than up-front means.”

Calls for so-called interest rate caps embody the deceptive tactics that are the hallmarks of payday opponents. The rate caps actually relate to fees not interest, as conventional interest rate calculations simply do not apply to short term transactions such as payday loans, the fees on an ATM withdrawal or any other similar one time charge. In addition, it has been demonstrated over time that rate caps - especially the levels being proposed - essentially eliminate the payday advance industry if passed. Oregon passed a less draconian rate cap that went into effect July 1, 2007. Within one year 75% of payday advance stores in the state closed, 800 jobs were lost and pawnshops boomed as consumers sought credit alternatives. In short, the Oregon rate cap ban was a disaster.

“A bill that wipes out nearly 2,000 payday lending jobs is the last thing our state needs,” said A.F. (Tony) Gagliardi, Colorado State Director for the National Federation of Independent Business. “Our members join with other business groups in opposing this or any other bill that adds to the economic hardship Colorado is facing. It just makes no sense to attack a highly-regulated, well-functioning industry that provides credit to hundreds of thousands of consumers.”

Added Chris Howes, president of the Colorado Retail Council “There must be some underlying reason for legislators who claim to support small business to turn around and attack small business. Aside from the obvious devastating impacts to the economy, this bill puts our elected officials in extreme risk of being labeled anti-jobs. I know of no one who would want to wear that tag.”

Scores of supporters of the payday lending industry assembled at the state capitol today to underscore the need to stop the punitive legislation.

 By ROBERT DEYOUNG

For those who depend on taking out a loan in advance of a paycheck, life may soon get harder if Congress passes the Payday Loan Reform Act.

 The bill’s sponsors, which include Rep. Luis Gutierrez (D., Ill.), say they want to clean up abuse in credit markets by clamping down on the prices lenders charge for payday loans. In reality, the legislation will reduce the supply of these loans and make borrowing more expensive.

 The reform is based on the false premise that consumers take out these loans without realizing how much they are paying. True enough, these loans are expensive. A two-week payday advance of $300 typically comes with a $45 finance charge — an implied annual percentage rate (APR) of 391%. Critics say borrows could not possibly intend to pay that much for an advance on their paychecks, and that the cost alone is evidence of exploitation of the working poor.

 But new research suggests that most payday borrowers are more rational and informed than critics believe. A January 2009 study by Gregory Elliehausen at George Washington University found that payday borrowers make informed choices. About half of the 1,173 payday borrowers he surveyed considered other credit alternatives — such as bank, credit card, or personal loans — before taking out a payday loan. Over 80% lacked sufficient funds in their bank accounts to meet their expenses, so by taking out a payday loan they avoided expensive checking account overdraft fees. Nearly 90% said they were either very or somewhat satisfied with the transaction.

 A November 2008 FDIC report on overdraft protection provides the context. According to this exhaustive study, the average APR on a two-week checking account overdraft is 1,067%, more than double the rate on the typical payday loan. Worse, a large percentage of banks studied by the FDIC take deliberate measures to increase the frequency of customer overdrafts — such as displaying account balances on ATM screens only after the overdraft has occurred, and increasing the number of insufficient funds checks by clearing large customer checks before small ones. Compared to these overdraft practices, payday loans are transparent.

 Nonetheless, the legislation pending before the House would cap payday-loan finance charges, even though government price limits almost always have negative effects. Price controls are especially harmful when competition is robust, as in payday-loan markets.

 Ron Phillips of Colorado State University and I examined seven years of payday-loan prices in 117 Colorado neighborhoods. We found that local markets with more payday stores tend to enjoy lower prices, but that the benefits of competition were largely been washed away when Colorado imposed a cap on finance charges. Over time, the longer a price cap remains in place the more borrowers get charges the legal maximum price. Price caps make these loans more expensive and less available.

 In a statement on the legislation, the Democratic leadership of the House Financial Services Committee disingenuously said that payday borrowers need special protection because they “do not have access to the mainstream financial system.” But in most cases, payday borrowers are required to provide a post-dated personal check as collateral. Payday borrowers have checking accounts and consume mainstream financial services.

 John Caskey of Swarthmore University, a leading expert on fringe finance, reports that the typical payday borrower is young, is married with children, has at least a high school education, and has a major credit card. So the characteristic that most differentiates a payday borrower from a non-payday borrower is simply the need for short-term credit.

 Being a paycheck behind on our bills is a situation none of us wishes to find ourselves. But when that situation occurs, the more options we have at our disposal, the better. So long as both sides of the deal have full information, these choices are better left to households and their creditors.

 Mr. DeYoung teaches finance at the University of Kansas. He is not an adviser to anyone affected by this legislation.

 From the Wall Street Journal April 14, 2009

Copyright ©2009 Dow Jones & Company, Inc. All Rights Reserved

Complete Response in PDF

February 4, 2009 - Denver, CO – The ‘survey’ issued today by the Bell Policy Center assailing the payday advance industry offers nothing of value for consumers and policy makers hungry for ways to address Colorado’s growing economic crisis.

Neglecting the growing financial pressures and immediacy of need caused by the economic crisis, the Bell report simplistically suggests consumers seek alternatives such as “negotiating new terms on credit cards, mortgages and other debts” or “borrowing from friends and family”.

“To suggest to consumers and regulators that someone needing their car repaired for work the next day can spend weeks renegotiating debts or obtain loans from others under financial strain is at best puzzling,” said Ron Rockvam, president of President of the Colorado Financial Service Centers Association (COFISCA).

The report also pays little attention the extended payment plan (EPP) option, a major reform made to the payday advance industry in 2007. Consumer Credit Counselors worked with the payday industry to pass a law creating the EPP that, by all measures, is proving beneficial to Colorado consumers. Yet somehow the Bell report cites nearly half of Credit Counselors surveyed as saying the EPP is either “very” or “somewhat” beneficial to their clients.

Other assertions made by the Bell report are disproved by a recent comprehensive national study, ‘Restriction on Credit: A Public Policy Analysis of Payday Lending’. The study, conducted by Petru S. Stoianovici of The Brattle Group and Michael T. Maloney, PhD of Clemson University, found “no empirical evidence that payday lending leads to more bankruptcy filings,” and cast further doubt on the so-called “cycle of debt” argument used by industry critics. The study concluded that that “…restrictions on the (payday) industry hurt consumers by driving up fees and that banning the industry entirely reduces access to much needed credit.”  Click on the link below for the complete study:

Clemson University Report on Payday Lending October 2008

Facing drastically diminishing credit options and growing financial pressures, Colorado consumers utilize payday loans to meet unexpected everyday expenses. The industry is one the most highly regulated and transparent financial service providers and capably provides over 300,000 Coloradans access to short-term credit.

“Coloradans are watching pennies now more than ever,” said Rockvam. “They understand clearly - even if others don’t - that payday advances are one of the most cost effective and responsible ways to cover short term expenses.”

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