Consumer lending study provides findings on availability and safety of small and large loans in Colorado
Jan. 23, 2023 (DENVER)—Attorney General Phil Weiser today sent a study of consumer lending in Colorado to the General Assembly. The study analyzed small-dollar loans, defined as loans up to $1,000, and larger installment loans, using data reported to the administrator of the Consumer Credit Unit in the Attorney General’s Office and data reported to Experian.
In the 2021 state budget, the General Assembly authorized the Consumer Credit Unit of the Department of Law to contract with a vendor to study the availability of safe and affordable credit by creditors other than banks and credit unions. The Department of Law contracted with the Financial Health Network to conduct the study.
“Colorado borrowers deserve access to safe, affordable, low-cost credit that can help improve their financial stability,” said Weiser. “We are committed to a data-driven approach to regulation and enforcement in this market.”
The study looks at the availability and safety of small dollar loans of less than $1,000 and large installment loans of more than $1,000. Regarding small dollar loans, after Proposition 111, which Colorado voters approved in 2018 and capped rates on deferred deposit loans at 36%, data reported to the state administrator show that many lenders shifted to offering alternative charge loans permitted by the Colorado’s Consumer Credit Code, which permit rates above 36%. The study also found that, while there was a drop in the number of retail outlets, available evidence indicates consumers who qualify are able to obtain alternative charge loans, given the growth of online lending.
The affordability of alternative charge borrowers is mixed, according to the report authors. On some measures, it appears that roughly one in five borrowers experience substantial difficulty in making the required payments. Other measures, however, suggest a substantially lower percentage struggle.
With large loans, the study finds that for consumers in the subprime and deep subprime credit tiers and those without a credit score—who constitute just over 20% of all consumers in Colorado—the share of Coloradans obtaining an unsecured installment loan is noticeably below the share in comparable states such as Utah and Missouri, which don’t have a usury limit. Comparing Colorado to the states without a usury limit, the study finds that on most measures, borrowers in the comparison states—and especially borrowers in the subprime and deep subprime credit tiers—experience greater levels of repayment difficulty than Colorado borrowers.
Borrowers who have encountered issues with their lender can file a complaint here.
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