Alabamians take out $ 14 million a week in payday loans

0


A new state database shows Alabamians borrow millions of dollars from payday loan stores every day.

The database created by the Alabama Banking Department found that people took out 462,209 loans over a 10-week period. A total of $ 146 million was borrowed, an average of about $ 14 million per week.

The state created the database to enforce an existing law that limits borrowing to $ 500 at a time.

Payday loans are loans with a term of between 14 and 30 days. Critics say the deals, with interest rates as high as 456%, trap borrowers in a cycle of debt. Shay Farley, an attorney for Alabama Appleseed, called the figures “shocking.”

The industry argued that the interest reflects the risk involved and that it provides a service to a traditionally underserved community. An industry representative said lenders are closing as states impose additional regulation.

Alabama has approximately 900 payday lenders. Cities across the state, including Montgomery, have adopted or considered moratoria on payday lending and securities lending.

The central database had long been sought after by supporters of wage reform. A 2003 law that first regulated the industry allowed lenders to use a variety of third-party databases, making it virtually impossible to enforce the $ 500 limit. The banking department decided to establish the database after the industry torpedoed a similar bill in the Legislature in 2013, despite broad bipartisan support.

The industry sued to block the database in September. Montgomery Circuit Judge Truman Hobbs dismissed the lawsuit last year. The Alabama Supreme Court upheld Hobbs’ decision in the spring.

The database only covers payday loans. Securities loans, whose interest rates can climb up to 300%, are governed by a separate law.

Reform supporters pushed to cap interest rates on payday loans and securities at 36%. While attracting dozens of cosponsors – frequently enough to pass bills – the legislation was often blocked in committee. House and Senate leaders, while supporting a database, have in the past said they wanted to see what that database would reveal before considering further legislation.

Editor Brian Lyman contributed to this report.


Leave A Reply

Your email address will not be published.