So what happens when you regulate an industry out of business? Specifically payday lending? Not only do you eliminate access to credit, but the economy also takes a hit.

A Colorado law that was passed last year extended the terms of the loans from a few weeks to six months and capped interest rates at 45 percent annually, basically eliminating the industry from serving customers who need access to short-term credit.

Jamie Fulmer, vice president at Advance America, said the law did more than reform the industry. “The law eliminated payday lending. It created a new system of six month installment loans. It is an entirely new product.” He continued, “Our company has closed half of our centers in the state and over 400 jobs have been lost in Colorado as a result of the law.”

Here’s a snapshot of how this industry previously served the Colorado economy (survey was done by IHS Global Insight in 2007).

The industry contributed over $294 million to Colorado gross state product (GSP) in 2007.

The payday lending industry supports over 4,200 jobs1 in Colorado, including 2,093 people directly employed in 641 storefront locations.

• The industry indirectly created another 783 jobs in supplier industries.
• Payday loan store and supplier industry employees induced the creation of 1,354 jobs through the purchase of goods and services using earned wages.

In Colorado, the total labor income impact from the payday loan industry is $184.5 million:

• Through direct employment, payday loan stores contributed $80 million in labor income.
• Suppliers to the payday lending industry contributed $41.6 million in labor income as an indirect result of the revenues generated by the payday loan industry.
• $62.9 million was generated from the wages of payday loan store employees and supplier industries’ employees as they were spent in Colorado’s economy.