Denver Borrower Rights: What Colorado Law Gives You

If you borrow money in Denver, Colorado, it helps to know your Denver borrower rights before you sign anything. Colorado law gives borrowers protections that apply automatically, so you do not have to negotiate for them. This guide explains the main ones in plain terms, shows what a small loan really costs, and tells you where to turn if a lender breaks the rules.

Colorado caps small loans at 36% APR

Colorado is a 36% APR state. Voters approved Proposition 111 in November 2018, and it took effect on February 1, 2019. It capped what the law calls deferred deposit loans, the product many people still search for as a “payday loan,” at a 36% annual percentage rate. Before the cap, Colorado payday loans averaged well over 100% APR, and most payday storefronts in the state have since closed.

The 36% covers the finance charge, and a lender may charge only the charges the Deferred Deposit Loan Act expressly allows. If the paperwork shows extra fees that push the cost higher, that is a red flag. Our guide to how Colorado’s 36% APR cap is calculated goes deeper.

What a capped loan actually costs

Here is a worked example at the cap. If you borrow $500 and repay it in six equal monthly payments, you pay about $53.79 in interest. The payment is about $92.30 a month, and you repay about $553.79 in total. A $300 loan over six months costs about $32.28 in interest, with payments of about $55.38 and about $332.28 repaid.

Stretching the same $500 over 12 months lowers the payment to about $50.23 a month, but the interest rises to about $102.77. A lower payment feels easier, yet it costs more overall.

Limits on amount and term

• A lender may not lend more than $500 to one consumer at any time.
• A lender may make more than one loan to the same person only if the total stays at or below $500 and there is at least a 30-day wait between loans.
• The minimum term is six months from the loan date. There is no maximum term and no minimum finance charge.

The six-month minimum is a big change from the old two-week payday model. It lets you repay in smaller pieces instead of one large payment. If someone offers a Denver loan under this law with a two-week due date, ask why before you go further.

The right to see the terms in writing

Under the federal Truth in Lending Act, a lender must show you the APR, the finance charge, the payment schedule and the total of payments before you commit. If a lender rushes you to sign before you have seen them, walk away.

Ask for the APR in writing, even if the lender quotes a monthly rate or a “fee per payment.” Installment and personal loans from finance companies fall under the Colorado Uniform Consumer Credit Code, and those lenders must hold a supervised lender license. Rules differ by loan type, so compare the written APR across several offers. Our page on APR versus interest rate explains why.

The right to cancel the next business day

For a deferred deposit loan, you may cancel on or before 5 p.m. the next business day after you take it. A decision made under money stress can look different the next morning. If you want to cancel, do it in writing, keep a copy, and ask the lender how to return the money. Do not wait for the last hour of the deadline.

Repaying early and renewing

If you repay early, the lender must refund a prorated share of the finance charge for the time left. Ask for the payoff amount in writing and check that the refund is included.

A deferred deposit loan may be renewed only once, at no more than 36% APR, with a prorated refund if renewed early. After that the debt must be paid. A lender may offer to refinance it as a supervised loan under the Uniform Consumer Credit Code, so compare the new APR and total cost with what you owe now. If you feel pushed from one loan into another, pause and look at cheaper options.

Limits on fees after a missed payment

For a deferred deposit loan, the lender may charge one returned-instrument fee of no more than $25 per loan. Court costs and reasonable attorney fees are allowed only if a court awards them, and attorney fees may not exceed the loan amount. The law allows no other default fees. If your statement shows late fees or “processing” charges, ask the lender where the law allows them.

You cannot be jailed over the loan

Under Colorado’s deferred deposit law, you cannot face a criminal penalty for taking the loan or because your check bounces, unless the account was closed before the agreed date. A threat of arrest over an ordinary unpaid small loan is a warning sign. Write down exactly what was said.

Check the license, especially online

Online and out-of-state lenders must follow Colorado law when they lend to Coloradans, and they should hold a Colorado license. Many say they are owned by a tribe or partnered with an out-of-state bank. Colorado’s effort to apply its rate caps to some out-of-state bank loans is being challenged in federal court, and the outcome is not final. So do not rely on a lender’s own explanation. Search the lender at coag.gov before you share personal information. Our guide to online loans in Denver covers more.

Debt collection and court papers

If a loan goes unpaid, the federal Fair Debt Collection Practices Act limits how collectors can contact you. They may not harass you or make false threats, and you can ask them to validate the debt in writing. The Fair Credit Reporting Act lets you dispute wrong information on your credit reports, which you can get free every week at AnnualCreditReport.com.

If a lender or collector sues, do not ignore the court papers. In Denver, small claims cases up to $7,500 are heard by the Denver County Court. Get legal advice before you respond.

Extra protection for service members

The Military Lending Act caps most consumer loans at a 36% MAPR for active-duty service members, including active Guard and Reserve, and covered dependents. The MAPR is broader than APR and includes most fees. Veterans, retirees and civilian workers are not covered. Airmen and Guardians at Buckley Space Force Base in Aurora can also ask about emergency help from the Air Force Aid Society before borrowing.

How to file a complaint for free

If a lender charges above the cap, operates without a license, or ignores the rules above, you can file a complaint with the Colorado Attorney General’s Consumer Credit Unit, which acts as the UCCC Administrator. It costs nothing, and you do not need a lawyer. Our page on how to file a complaint against a Colorado lender shows what to include. You can also complain to the Consumer Financial Protection Bureau.

Keep a paper trail and compare cheaper options

Save every agreement, disclosure and receipt, and log calls with the date, the representative’s name and what was said. That record can decide a complaint.

Before you borrow at 36% APR, check cheaper choices. Federal credit unions offer payday alternative loans (PALs) with interest of at most 28% plus an application fee of at most $20. Other credit unions may offer small personal loans, so check membership rules. As an illustration only, $1,000 borrowed at 18% over 12 months would cost about $91.68 a month and about $100.16 in interest. See credit unions and high-cost lenders in Denver for a comparison.

Where to get help in Denver

Dial 2-1-1, run by Mile High United Way for the Denver area, to find local assistance. Colorado Legal Services helps low-income residents with civil problems such as debt collection and eviction. For energy bills, Xcel Energy offers payment arrangements, and LEAP and Energy Outreach Colorado may help if you qualify.

This article is educational and is not financial or legal advice. Before you borrow, confirm the lender is licensed with the Colorado Attorney General — Consumer Credit Unit (UCCC Administrator), and read the fee disclosure in full.