Colorado charts perilous journey for credit access.

January 2, 2024
1 min read

Colorado is mapping a dangerous path on access to credit | American Banker

Colorado is mapping a dangerous path on access to credit

Key Points:

  • Colorado’s new law will restrict access to credit for cash-strapped citizens.
  • The law could potentially harm the growing fintech industry in the state.
  • Other states are considering following Colorado’s lead.

A new law set to go into effect in Colorado in July will restrict access to credit for the state’s most financially challenged citizens. The law will “opt-out” of a federal law that allows banks chartered under state law to have the same rights as national banks in terms of interest rates. This could have dire consequences for Colorado households that rely on credit cards and other financial services to make ends meet. Other states are considering following Colorado’s lead, potentially causing further harm to the fintech industry and limiting access to credit for vulnerable populations.

Under the current system, banks holding a “national charter” are subject to interest rate ceilings based on the state in which they are located, rather than the state of the customer’s residence. This has allowed for increased competition and access to credit for American families. However, Colorado’s new law would deprive the state’s most credit-deprived citizens of this access.

Colorado’s law is part of a larger trend of restrictions on small-dollar lending, which has already had negative effects on consumer access to credit in other states. The law will also harm the fintech industry, which has been crucial in providing financial services to underserved populations. Fintech companies often partner with smaller state-chartered banks to offer innovative and competitive choices to consumers.

If other states choose to follow Colorado’s lead, it could lead to the rechartering of many state-chartered banks as national banks, effectively ending the unique “dual-banking” system in America. Working-class Coloradans and other vulnerable populations would be left without access to the financial services they rely on.

The consequences of restricting access to credit could be catastrophic, particularly in a period of inflation and rising housing and food prices. It is crucial that Colorado reconsiders its decision and gives all of its residents access to the same financial opportunities as the more well-off.

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