Jerry Kopel

5/2/1997

A long response to Peter Minahan's diatribe in last week's Statesman isn't warranted since HB 1243, a bill that increases from 21 percent to 45 percent the amount of interest that can be charged in consumer credit transactions passed the House April 23d on a 34 to 30 vote. (See my Statesman column this week on who did what.)

The measure now goes to the governor for passage or veto. For that purpose, some discussion is useful. The fight to stop rapacious credit interest rates began with adoption of the Consumer Credit Code in 1971. That law provided profitable rates for money lenders AND rights for consumers. Since then it has been mostly downhill for the consumer.

Credit interest rates for consumers have skyrocketed in other states that have "deregulated" including Utah (between 50 to 200 percent on a $500 loan?). The information came from the Consumer Credit Code administrator who made it public to the Consumer Credit Advisory Council.

Having only a short time to gather that information, she contacted knowledgeable peers in other states in the same manner that she would have given the information to them if they had called with similar questions. Peter owes her an apology for his inappropriate comments about her. She has no ax to grind. He does.

Peter's livelihood as lobbyist for Consumer Financial Services depends on your believing interest rates to consumers won't rise if we raise the cap to 45 percent, that "up" really means "down". We both agree rates will certainly rise for the poor. Peter previously lobbied for Household Finance, a company known in the market as a "bottom feeder" specializing in loaning money to the "best of the worst."

In a December article in the Wall Street Journal, "Robert F. Elliott, a Household group executive, candidly describes where his business fits in the lower-market lending hierarchy: Right above payday loan companies (check cashers in Peter's letter); then there are pawn shops, and below them there really isn't anything except the informal market -- the loan shark." (The loan shark is separated under HB 1243 from the "legitimate" lender by ONE PERCENT of interest charged.)

In the first nine months of 1996, according to the Journal article, HFC charged off $922.7 million in bad loans, and still made a net income of $375 million, or $3.68 a share. Of course they had to charge a lot more than the 14.71 percent (almost 15 percent) Peter states is the average for consumer loans in Colorado over $2100.

"Average" isn't median, but if you add 21 percent and 9 percent, and divide by two, you get 15 percent. House Finance and other money lenders are presently able to charge the poor 21 percent in Colorado. That is forty percent more than charged the "average" client. Not enough?

Peter is right that nobody testified against HB 1243. There is no consumer lobby in Colorado, which is one reason the legislature often hears only from the money lenders and their allies.

Now it is up to Governor Romer who will be bombarded with calls and pressure from lobbyists like Peter Minahan and Joann Groff and money lenders who don't know how or when to stop, to destroy what little protection remains for consumers of credit in Colorado.

Jerry Kopel


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