Payday Loan Times

Republican state Senate candidate Don Stout called it "ridiculous and hypocritical" for state Sen. Lowell Barron to lead a reform effort against payday loan operations … when Barron himself owned more than 20 outlets until recently.

Barron, D-Fyffe, responded that Stout should stop the personal attacks and focus more on his own plans if elected, according to The Huntsville Times.

Stout leveled his charges Wednesday in a news conference at the Madison County Republican headquarters. The Senate district encompasses Jackson and DeKalb counties and eastern portions of Madison County.

He said Barron should "come clean" by proving that he's completely out of the quick payday advance business. Stout challenged Barron to reimburse borrowers the high interest he charged while in the business.

"Since he's had a Damascus road experience, apparently, I think he ought to return the money he's taken from them over the years," said Stout.

Barron, meanwhile, issued a statement restating his reform plan and asking Stout to back off.

"My opponent's entire campaign has been negative personal attacks on me with no plan for what he would do as senator," Barron said. "My plan to reform the payday loan industry is public, and I am proud that it has been endorsed by newspapers as well as leading consumer advocacy groups in the state."

Payday loan back story: The news conference followed Barron's announcement last week that he had sold his interest in faxless payday loan businesses and now plans to reform the industry.

Barron is drafting bills that would outlaw so-called rollover loans that can quickly rack up hefty interest charges, ban payday advance providers from operating within five miles of a military base, forbid lenders from garnishing any military wages, and prohibit the seizure of personal property on bad loans made by quick-cash outlets.

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People can change. Or people can wish to be re-elected as a senator from Alabama. Either way, a recent editorial in The Birmingham News suggests that others should get behind Lowell Barron (pictured).

As we reported on earlier, the senator in question used to own a series of cash loan stores. This year, however, Barron sold his payday lending businesses to a business partner. And now the Fyffe Democrat is proposing legislation to put more restrictions on payday loans.

"I've been in the banking and finance business for 25 years," Barron told The Associated Press, "and I realize there are people with limited credit who have few places to turn, but there is no reason why anyone should exploit people with a short-term cash program."

In the 1990s, online payday advance lending businesses spread like wildfire.

In 2003, the Legislature passed a law that set a maximum fee of 17.5 percent per transaction (still an annual percentage rate of 455 percent) and limited customers to only one rollover. The main thing the law did, however, was to make the practice legal, after state banking officials, attorneys general and courts were poised to outlaw payday loans because they exceeded the 36 percent maximum interest rate allowed under the state's Small Loan Act.

Barron says his new bill would:

• Completely do away with rollovers
• Establish a statewide database to prevent lenders from providing instant cash loans to anyone who has had such a loan in the past 60 days
• Prevent cash advance lenders from taking a person's property
• Ban payday and title loan businesses within five miles of a military base and prevent them from garnisheeing the pay of service members or from collecting from a service member who is deployed overseas for combat

It's all a welcome change from Barron, who as Senate president pro tem presided over the Senate when it passed the bad credit payday loan lender-friendly bill in 2003 over a compromised bill worked out with consumer advocates.

We can't say whether Barron's change of heart is due to a genuine, newfound compassion for struggling families or a political maneuver designed to help him hang on to his Senate seat. But protecting families from predatory lending is commendable.

His colleagues in the Legislature should follow his lead.

People are entitled to change their minds. Just ask Alabama Senator Lowell Barron.

Not only has Barron gotten out of the industry in which he was once a major player - bad credit payday loans - but he's planning legislation against it now.

Barron outlined his reform plans this week in a meeting with editors/reporters of The Huntsville Times. He was accompanied by media and political consultant Steve Raby, who is working on Barron's re-election campaign.

The main focus of the senator's efforts? A ban on"rollover" payday cash loans that can quickly rack up hefty interest charges. His bill would also prohibit payday advance lenders from operating within five miles of a military base and outlaw the seizure of personal property on bad loans made by quick cash outlets.

Barron's opponent in the November election, Republican Don Stout of Fort Payne, suspects the reform push is driven more by Barron's re-election hopes than a desire to clean up an industry Barron profited from.

"That's like closing the barn door after the mule is out," Stout said Wednesday. "He's been in this business for years. I just wonder if he plans to give any of these people their money back."

Stout said recent political polls in their state Senate district, which encompasses DeKalb and Jackson counties and part of Madison County, have shown broad public disfavor with the faxless payday loan industry.

A payday advance past: A 2005 financial disclosure form filed by Barron with the Alabama Ethics Commission in April listed financial ties to numerous payday loan businesses.

But he and his family sold any interest in any stores months ago.

Officials with Alabama Arise, an advocacy group for the poor, said while they would prefer banning cash loan operations like Georgia has done, they welcome reforms that would protect consumers from getting gouged.

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As the Pentagon focuses on national military payday loan laws, crafting a report that says 13 percent to 19 percent of service members took out cash advances last year, columnist Eddie Laird is concentrating more on issues at home.

He doesn't disagree with legislation to curb payday loans to soldiers across the nation, but he does take issue with how the industry has been handled in Alabama.

Laird writes about an Alabama judge that fired a shot across the dorsal fins of cash loan sharks in the state. St. Clair County Circuit Judge Charles Robinson ruled Alabama's Pawn Shop Act is unconstitutional because it allows pawn shops to charge interest rates on auto title loans far in excess of what's allowable under state law.

However, he remains pessmistic because "we've seen this 'Jaws' rerun before." Over the years, the problems posed by predatory lending practices have repeatedly been brought to the public's attention - by the media, by advocacy groups, by lawsuits. Nevertheless, lawmakers, state and federal, have done little to protect citizens.

In 2003, the Alabama Legislature did pass a pay day loan lending bill that provides a few protections for borrowers. But its primary purpose was to make legal an unfair practice. Moreover, the way it did so proves whose interests legislative leaders are apt to protect.

The real payday advance concern: After years of contentious debate, negotiations and failed bills, payday advance providers and advocates for the poor and elderly reached a compromise.

The legislation, among its measures, would cap fees and end rollovers. But after the House of Representatives passed the compromise bill, Senate President Pro Tem Lowell Barron - who operated a string of fast payday loan lending businesses - quietly replaced it with a bill more friendly to payday lenders, and the Legislature approved the substitute.

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Dr. Marvin Copes is an Education/Community Service Volunteer for AARP Alabama in Maylene. He recently wrote about the instant payday loan world, how to avoid applying for these resources and where to turn if you needed them …

Let's start with ways to rid yourself of debt: Contact your creditors to see if they will give you more time to pay your bills. If they agree, you can pay these balances when funds are actually available. Maybe borrow from a friend or family member.

If a payday advance is unavoidable, however, be sure to shop around. Although payday loans may be the only option for certain borrowers with poor credit, you may be able to find a bank or credit union that will approve a small loan with a reasonable interest rate. Compare both the APR and the dollar amount of the finance charge.

More financial advice: Consider getting overdraft protection on your bank account. You will avoid returned check fees and have a cushion in financial emergencies. If you own a credit card, try taking a small cash advance out on it.

If you find you are just a little short of cash each month or can’t pay unexpected bills, take a hard look at your income and expenses. Is there any way that you can develop a modest savings plan? If you track where you spend your money, you may find ways to save. Are there some purchases you don’t have to make? Think about it.

With just $300 in a savings account, you may be able to handle a financial emergency without going to a payday loan company. If you can do this, you can avoid high payday loan fees AND earn interest on your money until you need it.

Finally, if you need help preparing a budget, you can get it from a nonprofit credit-counseling agency or cooperative extension agent in your area. The overall idea is to look around before just settling on a cheap payday loan - and then being smart about this decision once you do have to make it.

"The rich rule over the poor and the borrower is servant to the lender." Anyone who has ever been in debt has experienced the truth of that proverb, writes James L. Evans in the Decatur (Ala.) Daily. In Alabama and across the country, debt is something we know about.

According to the Federal Reserve, Americans are dealing with more than $2 trillion in personal debt, and that figure does not include home loans. Of this amount, more than $800 billion is credit card debt, with an average interest rate of 18.9 percent.

A survey conducted by Visa found that 48 percent of credit card owners only pay the minimum monthly payment. On a balance of $3,900 with a 18.9 APR, it would take 36 years to pay off the balance making only the minimum payment. The cardholder would pay $10,000 in interest to go debt free.

Therefore, it's hardly shocking that in 2005, more than 2 million Americans filed bankruptcy to seek debt relief.

It gets worse, too. The ugly side of debt that these numbers do not reveal come from the payday loan industry. Customers seeking payday loans in Alabama, for the most part, are unable to secure credit from banks, traditional loan firms or even their credit cards.

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In a hotly-contested race for a seat in the Alabama State Senate, candidates are squaring off on a number of issues.

One such issue is payday loans and their regulation.

Randolph County Circuit Court Clerk Kim Benefield is attempting to unseat District 13 State Senator Gerald Dial, who has become an institution in the eastern part of the state. A major point of contention between the political novice and the 23-year veteran is a bill involving short-term, fast cash advance lending.

"[Dial] was the sponsor for the bill that allows a payday loan company to come into Alabama and charge up to 450 percent interest. That's wrong," said Benefield.

Dial shot back that his efforts to get the bill passed actually help curtail egregious payday advance loan sharking.

"It took the loan sharks off the street. It made them do two things: It made them register with the banking commission, and it put a limit that they could only charge 17.5 percent interest," Dial said.

Benefield said Dial also voted against a rural development center that would help people in the less-populated areas of the state, one that would "pool resources, and give rural Alabamians a resource center as far as bringing in ways to market their products."

Dial says he's doing everything he can to help his district.

"I have brought industry. The job market in my area is the best it's ever been. Mrs. Benefield has been in the courthouse too long to know what developing rural Alabama is all about," the Senator said.

Voters head to the polls Tuesday to vote.