Jerry Kopel


This is a good news/bad news story. The good news is that General Electric Capitol Corporation (GECC) in Utah plans to move their chartered bank to Colorado if the Colorado legislature passes HB 1357 (carried by Rep. Schauer and Sen. Schroeder) and they "promise" to hire 200 employees.

The bad news is that they plan to use HB 1357 as a conduit for private credit cards issued to Home Depot customers around the nation, including Colorado Home Depot users. And they plan to use the interest rates permitted by HB 1357 as the charges to be levied on their customers in other states.

Well, that still doesn't sound like "bad" news, until you read the bill, which passed the House with 20 "no" votes, all Democratic.

This credit card will be issued under a "commercial credit plan" and carry a "maximum" of 45 percent interest, plus "additional" interest charges as follows:

1. A fee for getting the credit card.

2. A "transaction charge" for each purchase or loan.

3. A teller machine charge for each use of the card.

4. A minimum charge whenever there is an outstanding balance.

5. A late payment charge when payment is late.

6. Fees for services rendered. (This could be anything under the sun but it may be saying the "customer", not the bank, will bear the cost of those "200 employees" to be hired in Colorado.)

7. Returned payment charges.

8. Charges for furnishing copies such as sales slips, invoices, monthly statements.

9. Any similar fees or charges provided for in the agreement governing the commercial credit plan.

The agreement can include reasonable attorney's fees if the account of the debtor is referred for collection to an attorney, plus all court and other collection costs.

The bill provides the commercial credit plan shall be governed exclusively by HB 1357 and "shall not be subject to any other law of Colorado that otherwise would apply to the commercial credit plan including, but not limited to, laws limiting the amount or duration of credit or the rate or amount of interest or other charges that may be charged, taken, collected, received, or reserved."

A supposed defense to any legislative complaints is that "the purchases on credit are made or the loans are obtained primarily for business, commercial, investment, or agricultural purposes."

Notice the word "primarily", which is not defined. HB 1357 can include consumer sales or loans as long as the "primary" purpose is not consumer oriented. The creditor can take any security for the sale or loan "acceptable to the creditor." That security is NOT limited to the subject of the sale or loan. It can include a mortgage on your house, farm, car, furniture, accounts receivable.

GECC has indeed chosen the right state to initiate this monstrosity. The Colorado legislature long ago gave up any pretense to protecting users of credit. Actual interest rates under HB 1357 could easily reach 100 percent. To paraphrase a New Testament story: "Jesus chased the money lenders out of the Temple and into the basement of the state capitol building."

The last governor to play a major role in protecting users of credit was Governor Love, and his tenure did see positive changes in laws governing credit practices. During Gov. Lamm's earlier years, he also made certain credit users were not abused, but eventually he "accepted" at face value statements made by credit grantors who looked him in the eye and lied. Gov. Romer on the other hand, has never made any attempt to pretend to care about credit users and their problems.

The mythology is that anyone in "business" is credit-sophisticated and would not sign on to anything resembling this "commercial credit plan". The actuality will be in the number of Colorado bankruptcies that can flow from HB 1357.

And of course, there is an exception in HB 1357 to the crime of criminal usury for interest rates in excess of forty-five percent. That crime is a class 6 felony under CRS 18-15-104 and was passed in 1972 (during Gov. Love's tenure) and carried by Rep. Ron Strahle. HB 1357 states the "additional charges" which could be as high as 100 percent interest are "not criminal usury". There are present exceptions to the criminal usury law for fees and charges permitted by the Consumer Credit Code. The difference is that those fees and charges cannot rise beyond a statutory maximum. The additional "interest" under HB 1357 can climb to the heavens.

If the debt is in default, buyers or borrowers under the Commercial Credit Plan have no protection under the Colorado Collection Practices Act, because the legislature removed commercial debtors from that protection in 1995.

This bill is obviously not limited to the bill's "pushers". Any credit grantor can set up a "commercial credit plan" and most will.

It is NOT limited to credit cards. It can be any form of revolving account sales or loans.

The bill is now in the Colorado Senate. Between 1981 and 1988, fraudulent Colorado security offerings allowed by the Colorado legislature ruined innocent investors in other states. Under HB 1357, "Colorado" financial institutions will export "interest rates" as high as 100 percent to innocent credit users in other states, regardless of that other state's attempted restrictions on criminal usury.

Perhaps Colorado's tourism ads should read: "Colorado: Beautiful scenery and white collar thievery."

(Jerry Kopel served 22 years in the Colorado House.)

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