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Colorado Payday Lending Reform Initiative
Colorado Earned Income Tax Credit Coalition | Child Care
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Payday loans, or deferred deposit loans, are cash advances on a borrower’s upcoming paycheck. They are advertised as short-term credit products to assist borrowers with immediate cash flow needs, but generally result in long term debt with an average APR of 353%, depriving working Coloradans of more than $76 million each year in unnecessary interest and fees.
In 2000, the Deferred Deposit Loan Act (DDLA) opened the door for payday lending in Colorado by exempting the industry from the state usury cap of 45% APR. Under current law, payday loans can be made in amounts up to $500 and the maximum finance charge is $75. The Department of Defense has labeled payday loans “predatory” and has set a 36% interest cap for loans to military personnel and their dependents.
CPE helped to form a broad coalition of organizations – the Colorado Payday Lending Reform Initiative – working for meaningful payday lending reform. During the 2008 legislative session, CPE played a leading role in support of House Bill 1310 (Rep. Ferrandino; Sen. Groff), which followed the recently enacted Oregon legislation and would have established a simple, cost-efficient and effective means of regulating the payday loan industry.
In February, we released a joint report with the Bell Policy Center titled "The Truth About Payday Loans: How Hardworking Coloradans Take the Bait and Get Caught in A Cycle of Debt" that clearly demonstrates how payday loans trap borrowers in an unanticipated and costly cycle of long-term debt they cannot easily escape.
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CPE is a part of a coalition of organizations working to make the Colorado Earned Income Tax Credit permanent, rather than a TABOR refund mechanism. Created to balance the 1999-2000 permanent reductions in the state income tax rate, the EITC was paid in 1999, 2000 and 2001, but has not been paid since, due to a lack of TABOR refunds the following years and then the enactment of Referendum C in 2005, which suspended TABOR refunds for five years. Restoring the state EITC would pump $52 million into Colorado’s economy and allow 264,000 low-income working Coloradans to keep more of their hard-earned money and spend it in their local communities.
During the 2008 legislative session, CPE strongly supported House Bill 1362 (Rep. Kefalas; Sen. Boyd), which proposed using $46 million of unused federal money for the state EITC. Under the bill, the state would have used unspent federal TANF block grant reserves and some funds from the Unemployment Insurance (UI) account, to finance the state EITC for the next two years. Two triggers would have ensured the long-term solvency and integrity of the UI. After 2010, the EITC would have been funded as tax credits are usually funded: an offset to state revenue.
Information and resources:
CPE Poll on Restoring the Colorado EITC
HB 1362 Fact Sheet and Q&A
EITC Action Alert
EITC Brochure
If you have any questions or for additional information contact Matt Sundeen.
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For the 65% of American families with two working parents, or one working parent in a single-parent household, securing child care is very difficult and is often a barrier to economic opportunity. For low-income families, support from employers and state and federal child care subsidies is a necessity, because without them working parents are less likely to retain a job for a long period of time and may even be forced to forgo advancement opportunities in the workplace because of the amount of time they must devote to caring for their children. To address the rising cost and unavailability of quality child care, many states have been successful at expanding access to child care through various incentives, such as offering tax credits and expanding many publicly-funded programs.
Often times, the main obstacle for implementing more child care programs or issuing more child care subsidies is inadequate funding. While federal funding for fiscal year 2008 increased by $672 million, states are still struggling to keep up with the growing demand for assistance. Income is the main determinant as to whether a family is eligible for child care assistance. Between 2001 and 2007, the eligibility rate has not grown to meet the need. Co-payment rates for child care have increased significantly over the same period of time, forcing families to spend an ever-growing portion of their annual income for child care services.
Quality and affordable child care is a critical component to ensuring that working parents in the labor force can remain in jobs that will support their families. Most of the nation’s 13.5 million low-income families with children have at least one full-time, year round worker in their family. Available child care options lead to increased worker retention and reduced absenteeism, and thus many employers have begun to offer such options to their employees, with some taking advantage of corporate tax credits for businesses that offer child care. Currently twenty-five states provide some sort of corporate tax credit. Companies also have begun to implement certain child care incentives like child care vouchers, employer administered co-op care, and child care back-up services, seeking to reduce employee turnover and boost productivity.
CPE has begun groundwork on identifying effective measures and developing policy recommendations to improve child care options for working Coloradans.
Information and resources:
CPE Child Care Issue Brief
2007 Legislative Action in the States
Child Care Funding by State for FY 2007 & 2008
Update on Federal Child Care Funding
2001-2007 Income Eligibility and Copayment Rates in the States
National Women’s Law Center
If you have any questions or for additional information contact Matt Sundeen.
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