Payday loan bill dies, but issue not dead

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By MARY SELL, Alabama Daily News

Last year 189,231 Alabamians took out 1.6 million payday loans valued at approximately $ 563.6 million from lenders in the state. They paid about $ 98.4 million in fees, according to an Alabama Department of Banking database.

“It’s absolutely massive,” Dev Wakeley, a policy analyst with progressive advocacy group Alabama Arise, recently said of the fees paid by borrowers.

“All of this money is siphoned from the communities and most of it comes from the state.”

Payday lending reform, particularly the fees that may be billed to borrowers, has become a perennial theme at the Alabama State House. A bill by Senator Arthur Orr, R-Decatur, allowing borrowers up to 30 days to repay the money, instead of 10-20 days, was passed earlier this month with an 8-6 vote in the Senate for banks and Insurance companies issue committees.

“The fact that this bill was rejected in committee does not negate the fact that there is a massive need for reform,” said Wakeley.

Lenders say their numbers have declined in recent years and more regulations will continue to sway them by sending Alabamians to online lenders that are not regulated by the state.

Max Wood, a payday lender and president of Borrow Smart, a payday industry group, told Alabama Daily News that the number of licensed payday lenders in stores in Alabama has decreased by about 50% to about 600 in recent years.

Wood said there were two reasons for this: the proliferation of online lenders and the enforcement of the Alabama $ 500 limit on the amount of money people can borrow at one time.

In 2013, Wood said the Alabamians had 4 million payday loan transactions, compared with less than 2 million the previous year.

“People didn’t stop borrowing, they stopped borrowing from state-regulated lenders and went online,” Wood said.

Those who voted against the bill in committee said they were concerned that more regulations on in-store lenders would encourage more borrowers to lend online.

“Doesn’t that create an uneven playing field for those who do it right?” Committee chairman Senator Shay Shelnutt, R-Trussville, said.

Orr has sponsored a myriad of payday loan reform laws over the past few years, many of which have been assassinated on committee, as was the case with this year’s legislation. Orr said he’s not giving up.

“I’m still advocating the issue and getting a fairer rate for borrowers in Alabama,” he said last week.

According to bank details:

About 37% of transactions in 2019 were for $ 500 while the average loan amount was $ 348;

About 66% of borrowers paid fees between $ 50 and $ 100.

Of the 189,231 borrowers, 29,765, the largest proportion, took out a loan and 18,414 borrowers had 20 or more loans.

The collection of database information began in 2015. The Alabama Supreme Court ruled earlier this year that the state banking department can use the database created by the 2013 law to enforce the $ 500 limit. Payday lenders sued the department for blocking the system from being created.

Senator Tom Butler, R-Huntsville, presented the bill to the Senate committee.

He said families living from paycheck to paycheck use the loans in emergencies and sometimes to buy school supplies for their children. The state’s database showed that most of the loans were made in August last year.

“Many of them are trapped in long-term amortization at an enormous 456% rate in this state,” Butler said. “I just think it’s wrong and we have to do something about it.”

Butler also said that some southern states, including Georgia, don’t have payday lenders. Payday loans in their most common form are illegal in Georgia, according to the Georgia state banking division. Small loans under $ 3,000 are subject to the Georgia Industrial Loan Act.

Wakeley, of Alabama Arise, said there was “a discussion of some other avenues” to reform, including possible changes at the local and federal levels.

“This subject will never be dead until we end this predatory structure,” he said.

Copyright 2020 WBRC. All rights reserved.

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