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The findings directly contradict arguments by some lenders that Colorado should raise its interest rate caps to expand credit access to subprime borrowers.
"High-priced loans are not the answer for Coloradans already financially strained by high prices of housing and food, and wages that haven't kept up," said Candice Wang, a senior researcher at the center and report co-author.
The research examined checking account transactions, bankruptcy filings, state lending data, and interviews with borrowers and financial counselors. It found that more than half of the 135,000-plus supervised loans issued by larger lenders in 2022 and 2023 went to subprime borrowers—those with credit scores below 660—according to Colorado Attorney General data.
However, those loans often created financial hardship rather than stability. More than 10 percent of the 3,300-plus consumer bankruptcy cases closed in Colorado in 2023 listed high-cost lender OneMain as a creditor, making it one of the most frequently cited creditors behind only major banks, credit card companies, and tax agencies.
The average bankruptcy case listed more than 20 creditors.
Subprime borrowers were 30 percent more likely than prime borrowers to fall 1-59 days behind on loan payments and 41 percent more likely to be 60 or more days past due or have loans charged off, according to 2023 Attorney General data analyzed in the report.
Rising housing costs have hit low-income Coloradans particularly hard. More than 51 percent of all renters in the state spend 30 percent or more of their gross income on housing, while over 80 percent of renter households earning less than $45,000 annually are cost-burdened, according to Harvard Joint Center for Housing Studies data cited in the report.
Food costs have also surged nearly 25 percent nationwide between 2020 and 2024, the research noted.
The report documented cases of borrowers juggling multiple high-cost credit products simultaneously—from subprime credit cards to installment loans to payday loan apps—with monthly debt payments consuming substantial portions of their income.
One borrower profiled in the study made monthly installment loan payments totaling more than 20 percent of her average income while also paying rent and servicing credit card debt. Another took out 24 payday loan app advances in a single month, borrowing half his monthly income from the app.
Financial counselors interviewed for the report unanimously opposed proposals to raise Colorado's current 21 percent APR cap on loans of $10,000 or more to 36 percent, calling such loans "ridiculous" and "detrimental" to their clients.
"While high-cost credit is widespread among low-income Coloradans, it can't close the chasm between households' income and expenses and, all too often, it widens this gap," said Andrea Kuwik, director of policy and research at the Denver-based Bell Policy Center.
The report also highlighted problems with payday loan apps marketed as "earned wage access" products. Nearly one in four Colorado users took out 25 or more advances per year, and 83 percent of users who experienced an overdraft saw increased overdrafts after their first advance, according to earlier research cited in the study.
In 2018, Colorado voters passed a ballot initiative limiting nearly all unsecured consumer loans to 36 percent APR or less. The legislature passed additional protections in 2023 to prevent out-of-state banks from evading those limits. A federal appeals court upheld enforcement of that law in November.
"When Colorado voters have been asked, they have shown strong support for stopping predatory lending practices," said Danny Katz, executive director of Denver-based CoPIRG.
The researchers concluded that policymakers should resist pressure to weaken existing consumer protections rather than allow higher-cost credit products onto the market.
"The answer to these families' financial struggles is not to take on more debt or to gain access to even more expensive debt," the report stated.
