Attorney General’s Office Releases Annual Lending Data

DENVER – Attorney General John Suthers announced that his office has issued annual reports on sub-prime lending activity in Colorado for 2005. The Attorney General’s Office enforces the Colorado Uniform Consumer Credit Code – Colorado’s consumer lending law. Sub-prime lenders that make or take assignment of consumer loans with an annual percentage rate (APR) of 12% or more must be licensed under the Uniform Consumer Credit Code (UCCC) and report their lending activity on an annual basis. Individual lender reports are compiled into composite reports, based on type of loans made.

“These reports reveal notable trends in lending activity in Colorado,” said Suthers. “Overall, these reports indicate that the number of Coloradans borrowing money has increased from last year in all categories of lending that we regulate.”

The three composite reports for calendar year 2005 are for payday or deferred deposit lenders, supervised lenders (finance companies and junior-lien mortgage lenders), and small installment lenders.

Deferred deposit loans, also known as payday loans, are small loans up to $500 for 40 days or less due on the consumer’s next payday. The maximum finance charge allowed for a $500 loan is $75. The supervised lender report reflects loans made by finance companies, insurance premium finance companies, and certain mortgage lenders that make junior lien loans with an APR over 12%.

This is the first full reporting year for lenders making small installment loans based on a 2004 law that added alternative loan finance charges for small installment loans of $1,000 or less with loan terms of between ninety days and twelve months.

Among the highlights of the reports:

Payday Lenders

  • The number of licensed payday lenders increased almost 14% from 2004 to 2005.
  • In 2005, payday lenders made almost $500 million dollars in payday loans to almost 250,000 Colorado consumers, a 34% increase from 2004 and a 101% increase from 2002.
  • The average payday loan amount was slightly over $300 to be repaid in 18 days with an average annual percentage rate of 345%.
  • Although 12.6% of payday loans were in default, collection activities resulted in recovery of the majority of that amount leaving 4.3% of payday loans charged off.
  • Almost 15% of the borrowers had 13 or more payday loans meaning they were in debt for at least 6 months of the year.

Small Installment Loans

  • In 2005, almost 10,000 Colorado consumers borrowed from small installment lenders.
  • The average small installment loan amount was slightly over $300 to be repaid in 6 and ½ months. However, almost 65% of all small installment loans were renewed or refinanced in 3 months. Average annual percentage rates varied from 73% to 168% depending on the loan amount and loan term.

Traditional Supervised Loans

  • The number of licensed supervised lenders increased to 1,608, over 10% from 2004 to 2005.
  • In 2005, supervised lenders made almost $1.9 billion dollars in loans to Colorado consumers, an 8% increase from 2004.
  • The average interest rate for all loans, open-end and closed-end, was approximately 17%.
  • Non-performing loans increased with delinquencies, foreclosures, and repossessions up by 34.4%, 151%, and 24.5% respectively.
  • Most sub-prime real-estate secured loans are made under the rate and points and fees triggers of the Colorado Consumer Equity Protection Act. However, that law does not apply to residential acquisition loans and revolving, open-end loans.

The Consumer Credit Unit of the Attorney General’s Office licenses lenders making sub-prime loans, conducts compliance examinations of these lenders on a periodic basis, and investigates complaints about unlawful activity. Lenders that make prime loans; banks, credit unions, and other depository institutions chartered by state and federal banking officials; creditors that make indirect loans such as automobile dealers (retail installment sales); and mortgage companies that make first mortgage residential acquisition and refinance loans are exempt from licensing and do not report data.

The composite reports for 2005 and prior years are available at: http://www.coloradoattorneygeneral.gov/UCCC

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