National data increasingly suggests that household debt is on the rise. Concerningly, a lack of comprehensive state-specific information prevents us from fully understanding what these national trends mean for Coloradans. Data collection and reporting requirements on debt and lending in Colorado — particularly as they relate to new, alternative credit products — can play a role in addressing these gaps. This data, in turn, can be used to create meaningful consumer protection policies that help Coloradans thrive.

National Trends Point to Growing Household Debt

From worse health outcomes to long-term financial insecurity, there’s no shortage of research on debt’s harms. Problems are often heightened for those who take out loan products — like payday and alternative charge loans — with high interest rates and fees because of the heightened risk of falling into a cycle of debt.

Given debt’s many harms, it’s concerning to see that:

• Levels of debt and accompanying delinquencies are increasing. Both are now above pre-COVID-19 levels.
• In particular, those with lower incomes and credit scores are experiencing higher rates of delinquency.
• There’s been a rise in the prevalence of new, alternative lending products, such as buy-now-pay-later and earned wage access. When compared to their more traditional counterparts, these products often have fewer regulations, greater fees and charges, and higher utilization rates among those with lower incomes. 

Gaps in our Understanding of Debt in Colorado

While helpful to have national data, there is a lack of Colorado-specific information on debt and lending. Specifically, we lack data on:

New lending products

Credit and lending take many forms — from traditional home mortgages and student loans to new options offered through financial technology (fintech) companies. Largely tracked through the Federal Reserve, we have relatively robust data on home, auto, and student loans, as well as credit cards. Information gaps, however, exist in relation to newer credit products, such as rent-to-own, buy-now-pay later, and earned wage access. As the prevalence of these products grows, data on their use is essential to understanding the full scope of debt in our state.

Disaggregated credit use & cost

Particularly for new credit options, we lack data on how often lending products are used, how much money is lent, and the total costs for consumers when considering interest rates, fees, and charges. Moreover, we don’t understand how use differs based upon demographic characteristics such as age, household income, credit score, and geographic location. These knowledge gaps limit our ability to recognize the true cost and prevalence of lending and debt.

Disaggregated credit outcomes

Finally, we also lack disaggregated information on consumer outcomes, such as rates of delinquency and bankruptcy. Especially since these outcomes are associated with cycles of debt, information on their prevalence is important for tracking debt’s long-term financial implications.

Data Gaps Prevent the Adoption of Meaningful Consumer Protections

The data gaps highlighted above have consequences. Without comprehensive data, we struggle to create targeted, equitable lending policies that are responsive to Coloradans’ evolving needs.

Notably, in the past, Colorado-specific information has played a critical role in creating meaningful consumer protections. For example, it was pivotal in the adoption of Proposition 111, which passed in 2018 and capped payday loan APRs at 36 percent. Specifically, Colorado data showed that lenders were targeting high cost products, which had APRs over 100 percent, to low-income Coloradans and were responsible for increased economic precarity. This example showcases the power of state-specific data — it shines a light on current landscapes and can provide the impetus to make meaningful policy change.

A Colorado Solution – Increased Data Collection

Our current data gaps are not inevitable. Instead, we have the ability to require the collection, aggregation, and publication of relevant debt and lending information. In practice, this could look like the following:

Collecting Relevant Information

Non-traditional, alternative loan products (ex: payday, alternative charge, earned wage access, rent-to-own, and supervised installment loans) would be required to do the following:

• Report on credit use including the number of loans which were issued and a breakdown of average costs (ex: principal, interest rate, charges, fees, and supplemental products)
• Report on credit outcomes including rates of delinquency, refinancing, repossession, and bankruptcy
• Disaggregate the information listed above based upon consumer geographic location, age, credit score, and income

Aggregating and Disseminating Information

• All data would be submitted to the state’s Office of the Attorney General, which would aggregate and publish the data on an annual basis

Building on existing systems, the state has an opportunity to gain a more robust understanding of how Coloradans are impacted by debt. The collection of Colorado-specific debt and lending information — specifically for new, alternative loan products — will give policymakers the ability to create the tailored consumer protections Coloradans need.