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Payday Loan Laws In Colorado

Colorado Revised Statutes Section 5 -3.1-101 et seq.  regulates payday loans in Colorado.
The law set limits on the amount of debt, the amount of financing charges, and the amount of collection fees. The law also requires that all payday loans be in writing. A consumer can cancel a payday loan until 5 pm the day following the transaction.

Debt limit:

Short term lenders can only lend $500 per consumer during any one payday period. The maximum period of time the loan can be held outstanding is 40 days. The loan can only be rolled over (which costs money) once during the term of the loan. The maximum amount of finance charges that the lender can charge on one payday loan is 20% of any amount up to $300 and an additional 7.5% on any amount over $300.

These amounts add up to an approximate annual interest rate of 129 %. These loans should therefore be avoided if at all possible.

Collection Limits and Rules:

Lenders are only allowed to issue one NSF funds collection notice with a fee of $25. This is much better than the standard provision for bounced checks which is potentially three times the face value of the check and attorney’s fees in Colorado. If the loan is unpaid the lender can then proceed to civil court and recover the amount of the loan plus reasonable attorney’s fees.

Related Specific Laws:

5-3.1-103. Written agreement requirements

Each deferred deposit loan transaction and renewal shall be documented by a written agreement signed by both the lender and consumer. The written agreement shall contain the name of the consumer; the transaction date; the amount of the instrument; the annual percentage rate charged; a statement of the total amount of finance charges charged, expressed both as a dollar amount and an annual percentage rate; and the name, address, and telephone number of any agent or arranger involved in the transaction. In addition, the written agreement shall include all disclosures required by section 5-3-101(2). The written agreement shall set a date upon which the instrument may be deposited or negotiated. There shall be no maximum loan term or minimum finance charge. The minimum loan term shall be six months from the loan transaction date. The lender shall accept prepayment from a consumer prior to the loan due date and shall not charge the consumer a penalty if the consumer opts to prepay the loan. A lender may hold an instrument and delay completion of the transaction beyond the loan due date without any additional written agreement or new disclosure, but the lender may not charge any additional fees for holding the instrument or delaying the completion of the transaction.

5-3.1-105. Authorized interest rate

A lender may charge a finance charge for each deferred deposit loan or payday loan that may not exceed twenty percent of the first three hundred dollars loaned plus seven and one-half percent of any amount loaned in excess of three hundred dollars. Such charge shall be deemed fully earned as of the date of the transaction. The lender may also charge an interest rate of forty-five percent per annum for each deferred deposit loan or payday loan. If the loan is prepaid prior to the maturity of the loan term, the lender shall refund to the consumer a prorated portion of the annual percentage rate based upon the ratio of time left before maturity to the loan term. In addition, the lender may charge a monthly maintenance fee for each outstanding deferred deposit loan, not to exceed seven dollars and fifty cents per one hundred dollars loaned, up to thirty dollars per month. The monthly maintenance fee may be charged for each month the loan is outstanding thirty days after the date of the original loan transaction. The lender shall charge only those charges authorized in this article in connection with a deferred deposit loan.

5-3.1-106. Maximum loan amount - right to rescind

(1) A lender shall not lend an amount greater than five hundred dollars nor shall the amount financed exceed five hundred dollars by any one lender at any time to a consumer. Nothing in this subsection (1) shall preclude a lender from making more than one loan to a consumer so long as the total amount financed does not exceed five hundred dollars at any one time and there is at least a thirty-day waiting period between loans.

(2) A consumer shall have the right to rescind the deferred deposit loan on or before 5 p.m. the next business day following the loan transaction.