MONTGOMERY, AL (WSFA) - Most consumers find their way to a short term lending agency through difficult circumstances. On Thursday, Alabama lawmakers rallied support for legislation that would give borrowers 30 days to repay the loan versus the current 10 to 14 day repayment schedule.
“In doing so, it lowers the APR in excess to 450 percent, down to a little over 200 percent,” stated Sen. Arthur Orr.
The “30 Days to Pay” bill would specifically help those who fall into the debt cycle, forced to take out loan after loan to make the payments.
“This will impact 31 percent of the borrowers,” stated Dr. Neil Bertie who serves on the Alabama Payday Advisory Committee. “These are the people that roll a loan over an average of 12 times. They can easily wind up paying 450 percent interest.”
Alabama has the highest concentration of payday lending in the nation. The state’s average annual percentage rate is 300 percent. The Alabama Banking Department shows residents pay more than $100 million in fees to out of state predatory lending companies every year.
“The very least we can do is to ensure an out of state industry is not treating our people’s hardships as a cash cow,” said Dana Sweeney with Alabama Appleseed Center for Law & Justice. “Ensure our people aren’t paying twice as much as borrowers in other states.”
Sweeney, along with advocate from Alabama Arise, traveled the state to measure the true impact of payday lending on Alabamians as part of their research for the study, “Broke: How payday lenders crush Alabama communities.” The stories they heard were heartbreaking.
“Terry Knowles, a borrower in Huntsville, turned to a payday lender when his daughter was receiving specialized medical treatments,” Sweeney explained. “Soon, Terry and his family were struggling to pay for rent and groceries. He returned to the lender asking for flexibility, saying he was good for the money but his family was facing eviction, he just needed a little more time. It didn’t matter how many children I had, they just wanted their money. Terry and his children became homeless. They lived in a small, unheated tin shed through the winter in Huntsville, Alabama.”
Sweeney explained the family was forced to live in the shed for months, even though Knowles was working, because so much of his money was going to the payday lender.
“We have to pass this legislation,” stated Rep. Merika Coleman, “so that the least of these have a fair shot.”
A recent study by the Public Affairs Research Council of Alabama, or PARCA, surveyed nearly 400 people on this issue. Nearly 85 percent of those who were polled believe predatory lending should be restricted by the state.
Lawmakers believe short-term lending has a place, however the loopholes need to be closed.
“People are using these loans,” stated Rep. David Faulkner. “You don’t take a taxi to Atlanta, there’s a time and a place to take a taxicab. There’s a time and a place to use a payday loan.”
The legislation has bipartisan support from lawmakers and non-profits ranging from the State Baptist Convention to the Southern Poverty Law Center.
Mayors from the largest cities in the state, including Montgomery Mayor Todd Strange, are publicly supporting this legislation.
Our attempts to reach associations who advocate for payday lenders were unsuccessful.