Columnist Takes Issue With Legislative Response to Alabama Payday Loans
By J.J. CameronPayday Loan Writer
As the Pentagon focuses on national military payday loan laws, crafting a report that says 13 percent to 19 percent of service members took out cash advances last year, columnist Eddie Laird is concentrating more on issues at home.
He doesn't disagree with legislation to curb payday loans to soldiers across the nation, but he does take issue with how the industry has been handled in Alabama.
Laird writes about an Alabama judge that fired a shot across the dorsal fins of cash loan sharks in the state. St. Clair County Circuit Judge Charles Robinson ruled Alabama's Pawn Shop Act is unconstitutional because it allows pawn shops to charge interest rates on auto title loans far in excess of what's allowable under state law.
However, he remains pessmistic because "we've seen this 'Jaws' rerun before." Over the years, the problems posed by predatory lending practices have repeatedly been brought to the public's attention - by the media, by advocacy groups, by lawsuits. Nevertheless, lawmakers, state and federal, have done little to protect citizens.
In 2003, the Alabama Legislature did pass a pay day loan lending bill that provides a few protections for borrowers. But its primary purpose was to make legal an unfair practice. Moreover, the way it did so proves whose interests legislative leaders are apt to protect.
The real payday advance concern: After years of contentious debate, negotiations and failed bills, payday advance providers and advocates for the poor and elderly reached a compromise.
The legislation, among its measures, would cap fees and end rollovers. But after the House of Representatives passed the compromise bill, Senate President Pro Tem Lowell Barron - who operated a string of fast payday loan lending businesses - quietly replaced it with a bill more friendly to payday lenders, and the Legislature approved the substitute.
Lawmakers putting their interests ahead of the public's? Who could imagine?
A spokesman for a trade group that represents payday advance companies says its members have about 15,000 sites across the country. That's probably a low figure. After all, Alabama has about 1,000 payday loan sites - about four times as many payday lenders as McDonald's restaurants.
In his ruling, Robinson said the Pawn Shop Act violates equal protection rights by allowing title loan businesses to charge annual percentage rates of 300 percent, while other lenders are limited by state law. Alabama's Small Loan Act caps APR at 36 percent.
But advocates for customers needn't celebrate the ruling. The case is likely to be appealed, and there's no telling what state appeals courts will rule or when. In 2005, for example, the state Supreme Court ruled no faxing payday loans were illegal because of the high interest rates.
But the ruling came 2½ years too late - after the Legislature had passed its law making payday loans and 400 percent interest rates legal. The ruling applied only to loans made before 2003. Let's face it:
Most Alabama lawmakers care little about Alabama's little people. Why should they? Poor Alabamians don't give campaign contributions. They don't even hire lobbyists who wine and dine lawmakers. The poor are just too poor to matter.
The federal government, however, could do something on payday cash loan lending. Congress ordered the Pentagon to do the study, and this year the Senate passed legislation to impose a 36 percent interest cap on loans - but only for service members. Civilians would still be on their own in loan shark-infested waters, without even a life vest.
As they've always been.
