Alabama House committee passes weakened payday lending reform
The House Financial Services Committee voted Wednesday to approve a version of the payday lending reform bill already passed by the Alabama Senate, but neither side of the debate is particularly happy with the outcome. Weaker than the original legislation, the substitute bill offered during the committee meeting Wednesday restricts payday lenders to making loans at 15 percent for minimum terms of 28 days, which cuts the APR of such loans significantly, but not as much as reformers had hoped. The move is seen as a compromise, and the original bill’s sponsor Danny Garrett, a Republican of Trussville, said it means “[w]e’re moving to the point where we’ll have reform this year.” Besides the increase in the amount of interest allowed, one of the biggest issues reformers have with the new bill is the maintenance of the inability to pay off the loans in installments, one of the features they say keep low-income borrowers trapped in a cycle of debt. In a public hearing on the previous Wednesday, a member of the payday lending industry said the original bill would be an “extinction event” for the entire sector. Blake calls payday loan bill a “global extinction event” for payday lenders. #alpolitics — Tim Lockette (@TLockette_Star) April 20, 2016 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 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. 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.” But regardless of the compromise, the changes made to the bill may mean reform is dead in the water this year, as it will have to be re-passed by the Senate, and this time under the body’s unanimous consent rules, with just a few days left in the Regular Session.
Bill to regulate payday lenders inches closer to final passage
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.
Stephen Stetson: A good first step toward payday lending reform in Alabama
We’re calling for payday lending reform in Alabama, and we’re not alone. For years, reform of high-cost lending has been the goal of the Alliance for Responsible Lending in Alabama (ARLA), an incredibly wide-ranging coalition of activists and advocates. The groups pushing for reform span the spectrum, including 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. ARLA is a coalition staggering in its breadth and ideological diversity – and its members are excited to see the Alabama Legislature considering reforms that would lower costs for hundreds of thousands of payday borrowers now coping with interest rates of up to 456 percent a year. Let’s be clear: SB91, sponsored by Sen. Arthur Orr (R-Decatur) doesn’t give reform advocates everything they want. In an ideal world, lawmakers would cap interest rates on payday loans at 36 percent a year and allow more borrowers to be served by banks and credit unions (and family and friends), while making good plans and decisions about monthly budgeting. Sadly, that approach simply doesn’t seem politically possible right now in Alabama. Orr’s approach would do a whole lot of good for a whole lot of people, though. The bill, which the Senate is expected to consider in April, would enable the payday loan industry to stay in Alabama, while putting some common-sense rules in place to govern the loans. SB91 models reforms made in Colorado in 2010. The bill would cut interest rates, give payday borrowers at least six months to repay, and allow them to pay down the loan principal in installments. These would be meaningful changes. Under current Alabama law, payday loans are usually for two weeks and must be repaid in full, with no requirement for lenders to allow installment payments. In Colorado, extending the loans’ length and allowing installment payments has given borrowers a shot to reduce their debt without it eating up huge chunks of every paycheck. Fewer people are pulled into a ceaseless churn of short-term loan after short-term loan. Again, SB91 wouldn’t solve every problem related to consumer debt, and it wouldn’t eliminate the payday loan industry in Alabama. It’s a compromise proposal that would curb some of the worst excesses of an industry built on loans that leave far too many people trapped in debt. It would help keep some folks out of bankruptcy court, and it would allow more reasonable lending approaches to flourish. 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. A growing number of Alabamians now agree: The time has come to give payday borrowers some relief. SB91 would be a real and substantial step in the right direction for Alabama consumers. • • • Stephen Stetson is a policy analyst for Arise Citizens’ Policy Project, a nonprofit, nonpartisan coalition of 150 congregations and organizations promoting public policies to improve the lives of low-income Alabamians. Email: stephen@alarise.org.
Alabama group hosts public forum to discuss consumer lending concerns
The Alliance for Responsible Lending in Alabama (ARLA) held a public forum in Birmingham Tuesday to discuss high-cost consumer lending and the group’s plans to address such practices in the upcoming legislative session. The forum was co-sponsored by the YWCA of Central Alabama, the Community Foundation of Greater Birmingham, the Women’s Fund of Greater Birmingham and the Greater Birmingham Republican Women. “We were pleased with the quantity and quality of the folks that turned out,” said Stephen Stetson, a Policy Analyst with Alabama ARISE, one of more than 20 groups affiliated with the umbrella organization connected to ARLA. According to Stetson, ARLA has worked for the last three to four years to pass legislation that would be an interest rate cap of 36 percent on all payday and title loans in the state, which are currently at 456 percent and 300 percent respectively. Stetson noted that roughly 18 other states have enacted such caps, including Arkansas (17 percent), Georgia (60 percent) and North Carolina (36 percent). Several legislators have signed onto ARLA’s legislation in the past, including Rep. Danny Garrett (R-Trussville), Sen. Arthur Orr (R-Huntsville) and Sen. Larry Stutts (R-Marion). This year’s legislation is slated to be sponsored by Rep. Allen Treadaway (R-Birmingham). Last year’s bill, which Stetson said got further than any previous legislation, died on the House floor due to “behind the scenes negotiations” from the consumer lending lobby, despite having more than 60 bipartisan co-sponsors. ARLA is currently working on this year’s legislation, which will yet again seek to put a cap on interest rates. “People do not think very highly of this industry,” Stetson said. “But they spare no expense lobbying in the statehouse.” However, Stetson is confident that this year’s bill, due to grassroots activism, will fare better than previous bill’s have because of public sentiment. “People understand that these (lenders) are stripping wealth out of communities,” Stetson said. “They have the money, but we have the numbers. People in Alabama know that change can be slow but, if we don’t get it through this year, we’ll be back next year.”
