Attorney General releases reports on state's 2009 subprime lending

DENVER — Colorado Attorney General John Suthers today issued three reports on Colorado’s 2009 subprime consumer lending activity. The reports cover lenders licensed by the Office of the Attorney General and do not include data on all loans issued in the state. The report contains data on 357 lending companies with 1,076 licensed locations making deferred deposit “payday” loans, small-installment loans and traditional supervised loans. According to the data, the volume of subprime loans consumers took out in calendar year 2009 reflected a 5.5 percent decrease from lending levels in 2008.

Payday loans

Payday loans — under the statutes in effect in 2009 — are loans limited by law to $500 or less due on the consumer’s next payday, typically in two weeks. During the 2009 calendar year, the average payday loan amount was $368.09 with an average finance charge of $60.74, an 18.91 day term and an annual percentage rate of 318.51 percent. These statistics were virtually unchanged from 2008.

Highlights of the 2009 payday lending data include:

  • The number of Colorado consumers receiving payday loans fell 7.87 percent compared to 2008 to 279,570. (It should be noted that the number of consumers is overstated due to consumers receiving loans from multiple lenders.)
  • The total amount of payday loans grew nearly 2 percent to $576 million in 2009 compared to the prior year.
  • The number of defaults fell from 10.28 percent in 2008 to 8.8 percent in 2009.
  • The total amount of uncollectible payday loans also declined from $24.7 million in 2008 to $19.5 million in 2009.

The 2009 payday lending payment-plan data shows:

  • Thirty-four percent of all payday loans were eligible for a payment plan offer; 21 percent of eligible loans were converted into payment plants. Seven percent of all payday loans made in 2009 were converted to payment plans.
  • Forty-seven percent of payday loan consumers were eligible for payment plan offers; 60 percent of these consumers chose to take advantage of a payment plan. Twenty-eight percent of all payday loan consumers in 2009 entered into one or more payment plans.
  • Seventy-two percent of all payment plans were successfully completed.
  • Nearly 61.4 percent of payday lenders used “cooling off” or waiting periods with consumers to avoid making consecutive loans and the requirement to offer a payment plan option.

Small-installment loans

Small-installment loans are limited by law to loans of $1,000 or less and are due within 90 days to 12 months.

Highlights of the 2009 small-installment lending data include:

  • Five companies with 56 licensed locations made small-installment loans in 2009, resulting in a 44 percent decrease from 2008.
  • Small-installment lenders lent $10 million to 9,047 Colorado consumers in 2009, a 37 percent decrease in loan volume and a 39 percent decrease in the number of consumers receiving loans compared to 2008.
  • The average loan amount grew 10 percent from $588.71 in 2008 to $649.32 in 2009.
  • The average contract term of a small-installment loan grew 11 percent to 9.98 months from 2008 to 2009, but most of these small-installment loans were paid or refinanced in an average of 4.78 months, up 15 percent from the previous year.
  • Seventy-two percent of small-installment loans were refinanced in 2009.
  • The annual percentage rate of small-installment loans made in 2009 ranged from 59 percent to 109 percent.
  • The total amount of uncollectible small-installment loans grew from 9.7 percent in 2008 to 10.6 percent in 2009.

Supervised loans

The supervised lender report contains data on sub-prime loans made by finance companies, insurance premium finance companies and mortgage lenders that primarily make junior-lien loans. Supervised loans also include auto and student loans and those for household goods.

Highlights of the 2009 supervised-loan data include:

  • The number of licensed lenders fell 15 percent between 2008 and 2009 to 557 licenses.
  • Loan volume fell between 2008 and 2009 by 13 percent.
  • The volume of auto loans increased 62.09 percent from 2008 to 2009;
  • Licensed lenders continued to service and collect more than $1.37 billion in consumer loans, $1.55 billion in credit sales and $60.3 million in leases.
  • The number of delinquencies between 2008 and 2009 rose by 16 percent.
  • The number defaults increased by 40 percent between 2008 and 2009.

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The Office of the Attorney General enforces the Uniform Consumer Credit Code, regulates supervised lenders and retailers selling goods and services on credit and investigates consumer complaints. The annual reports do not include data from lenders that make prime-rate loans; financial institutions such as banks, credit unions, and savings and loan associations; creditors that make indirect loans; and mortgage companies that make first mortgage residential and refinance loans, which are exempt from Uniform Consumer Credit Code licensing. The Office of the Attorney General also enforces state laws on credit repair and debt management services.

These reports and those from prior years can be obtained at www.coloradoattorneygeneral.gov/uccc. Consumers can file a complaint concerning a lender by sending an e-mail to uccc@state.co.us, calling 1-800-222-4444 or by visiting www.coloradoattorneygeneral.gov/complaint.

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