Alabama Newspaper: Restrict Payday Advance Practices
Regulating Alabama payday loans under the state’s Small Loans Act, as Sen. Bradley Byrne of Montrose wants to do, would be a good step toward protecting low-income citizens from predatory lenders.
Indeed, legislators should go even further.
Sen. Byrne introduced a bill that would bring payday loans under the regulations of the Alabama Small Loans Act. That would limit the interest charged by the quick payday advance companies to 36 percent a year.
Since 2003, payday loan companies have been allowed to charge 17.5 percent interest per transaction. In practice, that amounts to an outrageous annual interest rate of 300 percent to 400 percent, depending on the amount of the original loan.
The typical no faxing payday loan is less than $200 and is to be repaid within a few weeks. Under loan company practices, borrowers who want more time to repay a loan must pay an additional 17.5 percent every two weeks.
Granted, payday loan companies assume a considerable risk by lending money to low-income people who are in financial trouble. But their exposure is limited.
It’s encouraging that both the Alabama Democratic Party and the Christian Coalition of Alabama have endorsed Sen. Byrne’s bill. With broad support, the Legislature shouldn’t hesitate to pass the proposed legislation. Indeed, social justice demands that it be passed to prevent personal cash loan companies from exploiting vulnerable families.
Legislators also could limit consumers to only one payday loan within a 60-day period. They could prohibit payday loan companies from taking an interest in a customer’s personal property, and could restrict the companies’ dealings with members of the military.
Legislators opened the state to predatory cash loan practices by legalizing the payday loan business four years ago. Now, they need to step in to protect consumers from the companies’ worst practices.
SOURCE: The Mobile Register