DENVER – Consumer-interest groups rejoiced Thursday after Gov. John Hickenlooper vetoed legislation that they feared would have hurt low-income people applying for small loans.
The measure would have raised interest rates from 21 percent to 36 percent for loans between $1,000 and $3,000. Loans between $3,000 and $5,000 would have seen the rate spike from 15 percent to 21 percent.
“Prior to approving any increase in the allowable amount of interest charged, we believe it is necessary to more fully explore and substantiate the claim that a change in the law is necessary for these products to be accessible,” Hickenlooper wrote in his veto explanation. “Colorado’s consumers deserve this clarity as they will ultimately carry the expense that would result from this legislation.”
The governor also pointed out that the legislation moved quickly through the legislative process. It was introduced as one of the last bills of the legislative session – which ended May 6 – and sat on the calendar for only a week before it cleared both chambers.
Supporters of the legislation, including lenders, said raising interest rates was necessary to make the loans worthwhile so that the products can remain in Colorado. With a credit pinch as a result of the economic downturn, low-income families and individuals have found it difficult to secure loans in some cases, leaving them to rely on payday loans, which come with much higher interest rates that can lead to a cycle of debt.
“This is one of those issues where you almost have to hold your nose and still vote for it, because if you don’t, the branches will close, and the only option you’ll have is payday lending,” said Rep. Jovan Melton, D-Aurora, a co-sponsor of the legislation.
He said he would be back again next year to try and work on a compromise.
Much of the opposition was led by consumer-advocacy and left-leaning groups. One of the groups calling for the governor’s veto was the Bell Policy Center.
“Gov. Hickenlooper’s veto is a victory for hardworking Coloradans,” said Rich Jones, director of policy and research for the Bell Policy Center. “We appreciate his commitment to fairness and to keeping these credit products affordable. If there are further conversations about this issue, we will ensure that all voices are included in the process.”