Jerry Kopel

Romer vetoes HB 1243 increasing interest rate for consumers


Gov. Roy Romer showed courage on June 5th by vetoing HB 1243, a bill that would have raised the cap on consumer interest rates to 45 percent. HB 1243 was sponsored by Rep. Paul Schauer (R) of Littleton and Sen. Bill Schroeder (R) of Morrison.

Colorado and national money lenders were certain Romer would stick with them on this bill. Otherwise they never would have introduced it. After all, hadn't he gone along with each of their measures that had passed the legislature since 1991? The answer is "yes", which is why this veto was so important.

From 1991 through 1996, here are some of the measures money lenders have successfully placed into law during Romer's tenure. HB 1212 (1991) by Rep. Jim Dyer (D) of Durango and Sen. Bill Schroeder (R), adding a delinquency charge on consumer loans and certain real estate loans.

SB 160 (1992) by then-Sen. Bob Schaffer (R) of Ft. Collins and Rep. Paul Schauer (R) reduced civil and criminal liability for creditors who rely on an administrator's letter under the Uniform Consumer Creditor Code. SB 170 (1993) by Sen. Schroeder (R) and Rep. Dyer (D) added delinquency charges on revolving charge accounts and certain lender credit card revolving accounts.

SB 176 (1994) by Sen. Don Ament (R) of Iliff and Rep. Dyer (D) tore down the "wall" which protected consumers from outrageous interest rates of federally chartered banks exceeding Colorado criminal usury laws. Basis for doing so were U.S. Supreme Court decisions that could change in the future, but the "wall" is gone. SB 176 also added additional charges on consumer credit cards, whether seller or lender, and reduced information made available to assist consumers on sales and loans.

HB 1053 (1995) by Rep. Bill Kaufman (R) of Loveland and Sen. Tilman Bishop (R) of Grand Junction denied Colorado small business entrepreneurs the protection they had had for many years in this state from abusive money collection practices. HB 1076 (1955) by Rep. Schauer (R) and Sen. Ament (R) increased the delinquency charges above those allowed under HB 1212 back in 1991.

HB 1357 (1996) by Rep. Schauer (R) and Sen. Schroeder (R) deleted consumer related sales and loans from protection under the Consumer Credit Code and established a "Commercial Credit Plan" with no limit on interest rates that can be charged for credit or loans "primarily" (not solely) for business purposes. HB 1357 also provided numerous other charges never before seen in Colorado on top of interest.

HB 1243 of 1997, the bill vetoed, did "barely" pass the legislature with only 52 votes for the final version and that thin margin may have helped the governor make his decision.

Those who did vote for the measure and who are up for re-election in 1998 will likely find opponents using the bill as a issue. And legislators planning to run for other offices may also find their vote on this bill brought up from time to time, especially if their opponent is a legislator who voted against the measure.

Romer's veto shows there is a limit beyond which even the most sympathetic governor the lending industry has had the past 40 years, will go. Here are the final three paragraphs of his veto:

"This increase (to a maximum rate of 45 percent) is a dramatic departure from current law, which caps these agreements at 21 percent. More than doubling the current allowable interest rate is not appropriate or necessary to ensure adequate access to credit for Colorado credit consumers. Forty-five percent is simply too high.

"The proponents of this bill argue that it will allow them to offer credit to individuals with questionable credit histories, while lowering rates for good credit risks. While I agree that individuals with good credit might get a better rate, I am concerned that the borrower with few credit options will be in a poor situation to negotiate a reasonable term.

"People with poor credit histories are often in vulnerable situations for other reasons, and the limits we have in place now are there in part to protect these people from being taken advantage of or from making decisions based on desperation rather than reason. I do not believe we should remove these protections.

"In conclusion, I am vetoing this bill for the simple reason that I cannot in good conscience allow the interest rate to be raised to forty-five percent."

Does this mean Romer would accept an interest rate increase, but not this high? I hope not. Colorado doesn't have a "consumer lobby". Minority Democratic leadership in the House and Senate deserve much of the credit for convincing the governor of the abuses this bill would have allowed. But Colorado does need a consumer lobby and Romer could use his office to bring together individuals who could coalesce into a consumer lobby.

From 1987 through 1990, the first four years of Romer's tenure, the money lenders were not successful in abusing consumers of credit.

Back in 1990, Romer vetoed HB 1247 by then-Rep. Kathy Williams (R) and Sen. Schroeder (R) which provided a new credit card delinquency charge. Romer wrote:

"I have vetoed this bill because I believe the cost of this credit (21 percent plus the penalty) is too high. I recognize the abuse of credit is a problem in our society. I believe a better way to control the costs of delinquent payments would be to cancel the credit card after a set number of late payments. This remedy is available now without statutory change to those companies which offer this credit."

Also in 1987 through 1990, then-Attorney General Duane Woodard opposed most bills designed to abuse consumers who use credit, both as AG and as the third and deciding member of the Colorado Commissioners of the Consumer Credit Code.

This changed with the election of Attorney General Gale Norton who has consistently sided with the business representative on the credit code commission and not the consumer member, producing two to one votes for the money lenders, including this 45 percent interest rate attempt, during her seven years in office.

And in 1993, Romer DID approve SB 170 (mentioned above) which imposed even greater penalties on credit card holders than those he vetoed in the Williams bill of 1990.


Jerry Kopel writes a column for the Statesman based on 22 years past experience as a state legislator.

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