Have you ever heard the term "death by a thousand cuts"? It means you overcome an enemy through consistent minor victories over a long period of time.
That's the approach the credit industry has taken (a smart policy decision) to destroy the Colorado Consumer Credit Code. The last time any even-handed amendments were made to the code was 1975: HB 1349 by Rep. Kopel (D) and Sen. Decker (D). It has been downhill for consumers and their wallets the past twenty years, including 1995.
Here are some of the "thousand cuts" and who made them over the last five years:
HB 1212 (1991) by Rep. Dyer (D) and Sen. Schroeder (R).
This law amended CRS 5-3-203 (5). It added a delinquency charge of up to five percent or $10 on consumer loans, and up to five percent on the delinquent unpaid installment of real estate secured loans which were not precomputed.
SB 160 (1992) by Sen. Schaffer (R) and Rep. Schauer (R).
This law reduced liability for creditors under the Uniform Consumer Credit Code who rely upon a written response made by the credit code administrator to an inquiry even when that response is later determined by the courts to be "legally invalid". Amendments were to 5-5-203 and 5-6-104.
SB 170 (1993) by Sen. Schroeder (R) and Rep. Dyer (D).
This law added delinquency charges of up to $15 on revolving charge accounts and up to $15 on lender credit card revolving loan accounts not secured by land. CRS 5-3-203 (4) and (6)
SB 176 (1994) by Sen. Ament (R) and Rep. Dyer (D).
This law added charges of up to $2 or 2 1/2 percent of the amount advanced under seller or lender credit cards plus a charge up to $20 on a dishonored instrument, plus a 50 cents credit service charge regardless of how short the billing cycle is, on sales and loans.
Information to assist consumers on sales and loans was reduced to a minimum. This included a decrease in the number of notices received by consumers as to changes in charges on revolving accounts. By accepting use of an account, buyers and borrowers waive some of their rights.
The "wall" which had protected Colorado consumers from outrageous charges permitted in other states was torn down. This allowed interest rates to exceed what would otherwise constitute criminal usury and imprisonment for a felony in Colorado. (Parts 2,3,4 of Article 2 and Parts 2,4,5 of Article 3 of Title 5, and 5-13-104 and 18-15-104.)
HB 1076 (1995) by Rep. Schauer (R) and Sen. Ament (R).
This bill, which has passed both the House and Senate, will increase the maximum delinquency charge to $15. It replaces "the lesser of five percent of the unpaid amount of the installment or ten dollars."
As with the previous bills commented on, this delinquency charge is in addition to the interest which continues to be charged. If the unpaid amount was $200, there would only be a $5 difference, but if it was a $50 payment, the old law would be $2.50, and could be $15 under the new law . CRS 5-3-203 (5) (a).
HB 1076 was opposed in the Senate on a bi-partisan basis. Republican "no" votes were Bishop, Blickensderfer, Meiklejohn. Democratic votes against HB 1260 were Gallagher, Mares, Martinez, Pascoe, L. Powers, Rupert, Tanner, and Thiebaut.
HB 1260 (1995) by Rep. Paschall (R) and Sen. Schroeder (R).
This bill died in the House on second reading. It would have allowed up to three percent (also called "points") of the principal amount of the loan to be charged in addition to the loan finance charge on supervised and unsupervised non-precomputed loans secured by an interest in land.
"Points" can be charged now, but they are limited by the ceiling on how much interest can be charged. HB 1260 would have broken that ceiling.
As an example: You borrow $10,000 on a loan payable in 12 months with a three percent prepaid finance charge. Under present law, total payments would be $11,173.65, and 21 percent interest. Under HB 1260, total payments would be $11,508.84 and 26.77 percent interest.
Legislators can expect to see the "son of HB 1260" surfacing in 1996. Death by a thousand cuts will continue, since the money lending lobby has always had its way, eventually, with the Colorado legislature.
Jerry Kopel writes a column for the Statesman based on 22 years past experience as a state legislator.
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