Alabama lawmakers are planning to revive a proposal to regulate payday lending in the state. The House Financial Services Committee is scheduled to revisit legislation sponsored by Rep. Patricia Todd (D-Birmingham) that was referred to a subcommittee several weeks ago. Lawmakers are proposing a compromise that Todd said would not be as far-reaching as her own plan. The revised bill would remove language to cap interest rates and would be limited to the establishment of a central database to ensure that payday lenders and customers adhere to state loan limits.
“We figure if we get the database, it will give us enough information to move forward on the other stuff in a year or two,” Todd. “But it will give us good data, and it will restrict people from having more than $500 [out in loans] at a time.”
It is unsure whether the bill will be voted out of the committee. Todd said the new proposal is the result of negotiations that involved House Speaker Mike Hubbard (R-Auburn). Senate President Pro Tem Del Marsh (R-Anniston) has also expressed a preference for legislation that would focus on a database.
In Alabama, payday lenders can charge up to 456 percent annual percentage rate (APR) on short-term loans that usually last between 14 and 30 days. Title loan operators can charge up to 300 percent APR. Critics say the products trap consumers in a cycle of debt in which they take out new loans to pay for existing ones, but the industry says it provides a service that traditional lenders do not. Under current state law, payday lenders cannot extend loans to customers who have more than $500 in outstanding loans; but customers can still go to different stores for loans.
Shay Farley -- legal director of Alabama Appleseed, which supports payday reform -- said the bill is a good first step, although it does not go as far as she would like.