On Tuesday, Colorado Attorney General Phil Weiser’s office settled two cases against companies that illegally lent Coloradans money at interest rates higher than Colorado’s cap.

In Colorado, APR interest rates on loans are capped at 36%. However, certain out-of-state banks are allowed to give loans at higher rates, per federal law, according to a press release issued Tuesday by the office of the Colorado Attorney General.

Avant and Marlette, two companies not authorized to lend at higher rates, respectively partnered with WebBank and Cross River Bank–the idea being that, with their partnership, Avant and Marlette could borrow the banks’ ability to lend at high interest rates.

Weiser commented on the cases and the importance of this settlement:

“Protecting consumers from predatory loans is among my top priorities as Attorney General and we take the 36% lending cap very seriously,” Weiser said in a press release yesterday. “Many Coloradans are hurting financially due to the economic impact of the COVID-19 pandemic and they are susceptible to unscrupulous lenders who take advantage of them, lending at rates far above what Colorado law permits. This agreement protects Colorado consumers and creates a model for how other lenders can comply with Colorado law and treat consumers fairly.”

The terms of the settlement, as stated in the press release, require WebBank, Cross River Bank, Avant, Marlette, and other “non-bank” partners to commit to providing Colorado consumers with consumer protections, as well as commit to not selling loans that exceed 36 percent interest.

The non-bank partners, such as Avant and Marlette, will also be required to hold a Colorado lending license.

Additionally, the companies involved will pay over $1 million towards State of Colorado consumer protection efforts.

The companies will also pay $500,000 to MoneyWi$er, a program that teaches kids how to be financially smart and responsible, in an effort, in part, to teach the next generation how to avoid predatory loans.

“The MoneyWi$er program increases financial literacy, and it helps Coloradans become better educated consumers so that they are able to make wiser financial decisions and be less susceptible to fraud or predatory practices,” Weiser said in the press release. “MoneyWi$er also arms Colorado’s future generations with the essential knowledge and life skills needed to confidently navigate the complex world of consumer finance.”

Low-income Coloradans of color are especially at risk from loan sharks, according to the Bell Policy Center, particularly when it comes to payday loans, which typically see the highest interest rates. This makes the MoneyWi$er program, and the settlement, especially notable.

According to American Banker, should the companies comply with the terms of the settlement by following consumer protections, they will be granted “safe harbor” in Colorado–in other words, they will be protected from liability.

The settlement will also force the banks involved to shoulder more risk in future partnerships such as these, where the “true lender” is unclear.

In 2018, Colorado voters capped payday-loan interest rates at 36%, a policy that went into effect in February 2019. Before that, 2010 legislation had capped payday loan interest rates at 120%.