Alabama lawmakers consider raising cap on small loans

Alabama lawmakers consider raising cap on small loans

MONTGOMERY, AL (WSFA) - Alabama lawmakers are considering a bill which will increase the cap on small loans to $1,500. Proponents argue it's a good way for someone to establish credit, but opponents believe the measure could lead to predatory lending.

The cap on small loans has not been increased since 2002. Senator Gerald Dial, the sponsor of the bill, thinks it is a good way for young people to have more options and establish credit.

"What this does is that it creates a process maybe a individual or a young couple wanting to establish some credit they borrow this money, they pay it back on a payment basis and they reestablish their credit," said Senator Dial.

Opponents like the Southern Poverty Law Center in Montgomery say it would give lenders a chance to jack up rates and put those taking out loans in a position of never being able to pay them back.

"What this bill is doing is just making it more available to get a loan that they can't afford and that damages credit more so than a loan that isn't available to them," according to Shay Farley with the SPLC. The bill passed committee and its next step will be on the senate floor.

Copyright 2017 WSFA 12 News. All rights reserved.