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Payday loan industry grows in state

September 25, 2006 - Denver, Colorado

The number of Coloradans borrowing money from sub-prime lenders increased last year, according to data released Monday by the Colorado attorney general's office.

In Colorado, sub-prime lenders, who handle consumer loans with an annual percentage rate (APR) of 12 percent or more, must be licensed by the state and report their lending activity every year. The rules don't cover lenders that make prime loans; banks and credit unions; creditors that make indirect loans, such as automobile dealers; and mortgage companies that make first mortgage residential acquisition and refinance loans.

The number of licensed payday lenders -- who make small loans of as much as $500 for 40 days or less, due on the consumer's next payday -- rose almost 14 percent in 2005 from 2004, the AG's office said.

In 2005, payday lenders made almost $500 million in payday loans to almost 250,000 Colorado consumers, up 34 percent from 2004 and up 101 percent from 2002. The average payday loan amount was slightly over $300, and was to be repaid in 18 days with an average annual percentage rate of 345 percent.

Almost 15 percent of borrowers had 13 or more payday loans, meaning they were in debt for at least six months of the year.

Meanwhile, almost 10,000 Colorado consumers borrowed from small-installment lenders, who loan $1,000 or less with terms of between 90 days and a year, in 2005. The average small-installment loan amount was slightly more than $300 and was to be repaid in six and a half months.

But almost 65 percent of all small-installment loans were renewed or refinanced in three months. Average annual percentage rates ranged between 73 percent and 168 percent.

The state also publishes a supervised lender report, which reflects loans made by finance companies, insurance premium finance companies and certain mortgage lenders that make junior lien loans with an APR over 12 percent.

According to the data, the number of licensed supervised lenders increased 10 percent to 1,608 in 2005 compared with 2004. Supervised lenders made almost $1.9 billion in loans to Colorado consumers, up 8 percent from 2004. The average interest rate for all loans, open-end and closed-end, was approximately 17 percent.

Non-performing loans also increased during 2005. Delinquencies rose 34.4 percent, foreclosures rose 151 percent, and repossessions gained 24.5 percent, year over year.

News Source

Denver Business Journal, Staff Writer

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