As the clock winds down on the Alabama Legislature’s 2016 Regular Session, a bill to regulate payday lenders which started with a great deal of momentum is now inching itself toward the finish line, despite broad support from both sides of the aisle in Montgomery.
SB91, sponsored in the Alabama Senate by powerful senator and committee chairman Arthur Orr (R-Decatur), and carried in the House by Sophomore member David Faulkner (R-Mountain Brook) would cap maximum annual interest on payday loans at 180 percent, down from current interest rates of 456 percent per year.
The bill passed the Alabama Senate nearly unanimously, garnering merely a single No vote.
While supporters of the bill believe they have the votes in the House, the bill is meeting some resistance on its way to final passage.
At a roundtable discussion held on April 18th by the Junior League of Birmingham, Rep. Faulkner said his primary goal is to get the bill, which he admits isn’t perfect but is a step in the right direction, out of committee and out of the House without any changes.
The bill did not receive a vote after a lengthy public hearing during last week’s Financial Services Committee meeting, during which members heard from advocates on both sides of the issue.
The reform being championed by two Republicans is somewhat of an anomaly, as such changes have frequently been carried by Democrats in other states. But Faulkner told Alabama Today it was a no brainer for him as soon as the lenders’ tactics were explained to him.
“When the issue was explained to me by a member of my church I just knew it was the right thing to do,” said Faulkner. “I see these places all over the place, I’ve heard the stories, once I learned more about it, I felt like this was usury, and that the State of Alabama is wrong for having a system in place that really allowed people to be preyed upon. I’m a less government, small government conservative, but I don’t believe when the government put in place a system that allows people to be preyed upon, I felt like that was wrong.”
A database created by the Alabama Department of Banking found Alabamians took out 462,209 loans over a 10-week period. A total of $146 million was borrowed, or an average of about $14 million each week.
A coalition of activists from across the state have fought for years to bring this reform to the table. The Alliance for Responsible Lending in Alabama (ARLA) has members from the Arise Citizens’ Policy Project, Alabama Appleseed, the Alabama State Conference of the NAACP, the Alabama Citizens’ Action Program, the Southern Poverty Law Center, and the Federation of Republican Women.
The group argues it has the deck stacked against them, with a well-funded special interest bolstering the bill’s opposition. A report by AL.com’s Kyle Whitmire found during the 2014 election cycle lenders gave more than $475,000, including $37.835 to House Speaker Mike Hubbard (R-Auburn) and thousands more to other influential members of the House and Senate.
While opponents of reform say such loans are sometimes necessary to help low-income families through tough times, ARLA policy analyst Stephen Stetson wrote in an op-ed last month that what can appear to be a helping hand for those in need can be an “anchor” holding them in a cycle of poverty.
“We all want a world where people can get the kinds of credit they need. But that requires putting some brakes on a system that all too often acts as an engine for poverty, handing out extremely high-cost loans to desperate folks who may treat them as a lifeline. Too often, those ‘lifelines’ instead end up as anchors, dragging people into financial quicksand.”
With only two weeks left in the session, the bill’s advocates have precious few days to shepherd it through the rest of the legislative process and onto the governor’s desk.