Industry preys on Alabamians
March 19, 2007 - Montgomery, Alabama
Starting later this year, payday lenders who prey on the working poor in Alabama, charging unconscionable interest rates of 450 percent or more, won't be able to do so for those Alabamians who serve in the military.
Thanks to Congress, a new federal law will make it illegal for lenders anywhere, including Alabama, to charge more than a 36 percent annual percentage rate to any military service member or dependent.
So if Congress recognizes that interest rates of 450 percent are outrageous to charge military members and dependents, shouldn't the Alabama Legislature provide the same protection for other Alabamians?
Alabama currently allows "payday loans" -- a small loan in which someone gets cash in exchange for a personal check that the lender holds until after the borrower's next payday -- to charge the equivalent of 456 percent interest when figured on an annual basis.
The state law contains loopholes that allow borrowers to take out multiple payday loans, often to pay off earlier loans. Such borrowing patterns often build a mountain of debt that fiscally buries individuals and families.
There are two competing bills in the Alabama Senate that supposedly would better regulate the payday loan industry in Alabama, but one clearly is preferable. A bill by Sen. Bradley Byrne, R-Fairhope, would put payday lenders under the state's Small Loan Act, effectively capping the annual percentage rate at 36.7 percent. It provides a far better protection for Alabamians than a competing bill by Sen. Lowell Barron, D-Fyffe, who has been a supporter of the payday loan industry for years. Barron's bill would supposedly limit rollover loans, but it would not bring the industry under the same regulations as other small loan companies.
Byrne actually supported earlier legislation that helped to create this mess, but he says he now realizes he was wrong.
"When we passed this in 2003, I was brand-new and not familiar with the issue, to be frank about it," Byrne told a Montgomery Advertiser reporter. "We thought we were doing the right thing."
Unless the Alabama Legislature passes Byrne's bill or one at least as strong, Alabama residents will fall into one of two categories -- those in the military who are protected from predatory lenders, and all other Alabamians who are fair game for such predatory practices.
"This is hurting some of the most vulnerable in our society," said Byrne. "It's a matter of conscience to a lot of people. I have heard from constituents who think these practices are not only improper -- they've used the term 'immoral.'"
We urge the Legislature to extend the same protections to all Alabamians that Congress has extended to members of the military and their dependents. It is time for legislators to stop payday lenders from preying on Alabamians desperate for small amounts of cash.
The Montgomery Advertiser, Editorial
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