Proposition 111 in the 2018 Colorado election: What to know about limitations on payday loans

This is the one about short-term loans that don’t require background checks.
2 min. read
Cash. (Jericho/Wikimedia Commons)

Proposition 111 asks if Colorado should limit payday loans to curb what some characterize as predatory business practices.

Here’s the language you’ll see on your ballot:

Proposition 111 proposes amending the Colorado statutes to:

  • reduce the total cost for a payday loan to a 36 percent annual percentage rate; and
  • expand what constitutes unfair or deceptive trade practices for payday lending.

How will it work?

Currently, annual percentage rates (APRs) on payday loans in Colorado can be as high as 180 percent. That includes fees and interest, and rates generally rise throughout a loan's lifespan. In 2016, average APR rates for Coloradans were at 129 percent. Proposition 111 would limit APR on payday loans to 36 percent. It would also decrease the cost to get such a loan from $293 to $53.

Who’s for it and who’s against it?

The conservative Colorado Springs Gazette Editorial Board announced an endorsement of Proposition 111, saying: "predatory lending exploits human trauma in a way a civilized society should not allow. At 36 percent, loan sharks will remain an option for people with sudden financial needs. And at 36 percent, the borrower has some chance of getting out of debt." On the other end of the political spectrum, Our Revolution, "the next step for Bernie Sanders' movement," has also endorsed the measure.

Coming in against the measure is Jon Caldara of the right-leaning Independence Institute, who said in an editorial that the measure assumes poor people are "too stupid" to make good decisions when it comes to taking short term loans. Beyond that, he said, high fees are just part of the business: "Payday loan guys aren’t saints, but their customers are in fact terrible credit risks. Many rack up massive debts to then declare bankruptcy, leaving the lender with nothing. To make up this loss, lenders charge wildly high rates and fees." Payday loan reform has also come up outside of Colorado. When the Consumer Financial Protection Bureau proposed new rules on short term loans last year, an industry trade group told NPR that reform regulation could "cripple" the industry.

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