The payday loan business boomed again in Colorado last year, according to new figures from state regulators.
After more than doubling between 2007 and 2008, short-term loans with interest rates up to 100 percent grew by about half last year, the Colorado Attorney General’s office reports. The increase locally is part of a nationwide explosion, reported by The Denver Post in May, in “fringe banks” that cash checks and make loans of last resort.

In Colorado, about 150 lenders now offer unsecured payday loans that usually must be repaid in about two weeks. In 2000, the state had fewer than a dozen payday loan stores.

Simple and fast
Getting a payday loan is simple and fast, as long as you have a job and a checking account. For a flat fee of $25, the most allowed by Colorado law, lenders and borrowers trade checks. The lender’s $100 check is good immediately; the borrower’s $125 check is post-dated, usually for about two weeks.

Still, the industry continues to grow.
Lenders made more than 230,000 small, short-term loans in 2010 with an average interest rate of almost 300 percent, according to the state. The loans totaled about $27.2 million, with an average annual interest rate of 278 percent.

That’s up about 50 percent from 2008, when lenders made 175,000 loans for $18.5 million, with an average interest rate of 369 percent. The interest rate fell between 2008 and 2010 because the average loan size increased slightly, while fees remained about the same.

As loans rose last year, defaults also soared, the state reported. In 2010, borrowers failed to repay about 8,900 loans, up from 5,700 defaults in 2008.

No complaints

Laura Udis, head of the state agency that regulates payday lenders, said her office has not received any complaints from consumers about the loans. “It’s a business with a very loyal clientele,” Udis said.

Udis said that because of a new law, her office will no longer examine every payday lender every year. Instead, regulators will check lenders only on an “as needed” basis, she said.

State usury law imposes strict limits on the interest rates for most loans made in Colorado. But the law contains an exception for small loans: Instead of charging interest, a lender can set a flat fee of up to $25, or 25 percent of the loan amount, whichever is less, to cover his costs.