In the News

Payday Loans Essential For Some
Greeley Tribune, Guest Column
March 10, 2010

Without a doubt, tough economic times are affecting us all. Businesses are cutting back until the economy recovers, often causing reduced paychecks for employees and even layoffs.

Families caught up in these necessary but regrettable situations have had to reduce their budgets and even dip into savings to weather the storm. We all worry about how long the “downturn” will last as we anxiously listen to the economic indicators daily hoping for good news.

Imagine, if you will, a situation where you have a job and are able to pay your bills, but just barely. A savings account is one of your goals but not a reality now. You do not have a credit history or credit rating that allows you to go to the bank or credit union to borrow extra cash for emergencies.

Examples might be: Your 15-year-old car, which you bought secondhand, blows a gasket and quits running. The mechanic will get you going over the weekend so you can get to work Monday, but he wants cash. Or one of your children breaks a tooth on the playground and requires immediate care for both pain and to preserve that smile you love, but again cash is required. These are just two of the real stories we've all heard or maybe experienced.

Maybe we've been fortunate enough to hear about a neighbor in such a situation and have been able to help. But what if, for a number of reasons, no one is there to help?

“Payday loans” may be your only alternative for a short-duration loan to help you meet your immediate need. For a fee you can write a check to the payday loan company with its understanding that your checking account will not have the necessary balance until you deposit your next paycheck.

The company gives you the needed cash to meet your emergency as you continue to meet your other financial obligations on time.

If the fee being charged mentioned above is divided by the amount of the check and annualized and then called interest, the rate that results is significantly higher than a bank or credit union. House Bill 10-1351 is being proposed and if enacted will limit the interest rate payday loan companies can charge.

If this happens, many if not most of these companies may go out of business. The rates being charged are in response to the fact that these loans are unsecured without any recourse in the event of a default.

I will be voting against House Bill 10-1351 because I believe payday loans provide a valuable service and are often the only option available in some cases, as I've listed. If some who use this option no longer have it available to them, where will they turn?

The fact that many of these companies have come into existence in recent years shows a growing need for their existence.”

Glenn Vaad is a Mead resident and represents District 48 at the Colorado General Assembly.

Editorial
By Staff of Northern Colorado Business Report
February 26, 2010

That's more like it.

Amid the posturing, accusations and partisan attacks flying across the aisles at the statehouse, Weld County Rep. Glenn Vaad, R-Mead, has introduced a bill that not only reeks of common sense, but also, if enacted, might actually help balance Colorado's budget.

House Bill 1176 would authorize a recovery audit on all state government agencies spending more than $25 million per year on outside vendors. The audit would be performed by an independent firm compensated with a percentage of any overpayments it uncovered and collected.

The bill specifies that the purpose of the audit is to recover payments made in error or over the amount actually owed, not in line with a purchasing agreement, or to someone not eligible to receive the payment. It would be conducted through the Office of Planning and Budget, separate from the annual financial and performance audits of all departments conducted by the state auditor.

We think this is a giant step toward potentially saving Colorado taxpayers millions of dollars while increasing government efficiency and accountability. A self-funding audit would not add to the state's expenditures and could actually decrease them, as in 14 other states.

We do have a few concerns that, if lawmakers can abandon their political food fight long enough to put some thought into crafting legislation, should be addressed before HB1176 becomes law:

  • Rather than the open-ended contract implied in the bill, the work of the independent auditor should be reviewed after three to five years by the state auditor, who could recommend putting the contract up for rebid or discontinuing it.
  • The audit firm must include an analysis of any systemic problems it identifies as leading to improper payments in its required reports to the Legislature, state auditor and the governor.

Nobody looks forward to being audited, and the incentive certainly exists for the independent auditor to be aggressive in recovering as much as it can. But for such an audit to be effective in ending inappropriate payments, it must include vendors as well as state workers. If fraud is discovered on either end of the transaction, it should be prosecuted. However, both employees and suppliers will be more forthcoming without the threat of punishment for good-faith mistakes - or working within a dysfunctional system.

Then it would be up to our elected officials to create a more efficient system for the future.