An ongoing effort by the federal Consumer Financial Protection Bureau to rein in the excesses of high-interest “payday loan” lenders has so far been generally been well-received in Alabama.
“The proposed CFPB rules have bipartisan support and empower consumers to make better financial decisions for themselves,” said Rep. Terri Sewell, a Democrat. “I strongly support the adoption of these proposed regulations and will continue to fight for greater consumer protections in my role as a member of the House Committee on Financial Services.”
Sewell repeated an oft-cited figure that there are “four times as many payday lenders in Alabama as there are McDonalds” in supporting the regulatory action.
“Borrowers should not be at the mercy of predatory lenders and CFPB’s proposed rules would strengthen consumer protections and make it harder to prey on vulnerable communities,” said Sewell, who also noted minority communities are disproportionately affected by payday lenders’ usurious behavior.
Arise Citizens’ Policy Project, a nonpartisan public interest advocacy group, also endorsed the moves by and large, though they said state-level reforms are still needed.
A related bill which would have limited interest rates among other reforms circulated in the state Legislature earlier this year, though it ultimately failed to reach the desk of Gov. Robert Bentley.
“Today’s CFPB announcement is an important step in the right direction for payday and title loan borrowers in Alabama, but it’s not enough. The new federal rules would strengthen consumer protections by requiring lenders to verify borrowers’ ability to repay for many loans. But the rules contain many exceptions, and they may not go into effect for quite some time,” said policy analyst Stephen Stetson.
“The new rules also would not change the extremely high annual interest rates that Alabama allows those loans to carry: up to 456 percent a year for payday loans, and up to 300 percent a year for title loans. Alabama needs to build on these rules at the state level by closing loopholes and encouraging more affordable short-term loans for borrowers,” said Stetson.