Next month, the Alabama State Banking Department could make a final decision on the creation of a unified database to track payday loans. However, this likely will be only the first step in a long and potentially litigious process. The department announced the proposal last May after a defeat in the Legislature of payday and title loan reform measures, including an interest rate ceiling.
Department staff will make a recommendation to State Banking Superintendent John Harrison, who will make the final call. The database would cover only payday lenders, not auto title lenders. Payday loan critics say customers taking out the short-term loans face annual percentage rates that can reach 456 percent and often must take out multiple loans to service earlier ones. A single-source database could help reduce this practice. Some fear, however, that the database would only help online lenders replace storefront businesses.