Alabama Payday Loan Bill Introduced
Sen. Lowell Barron, D-Fyffe, has introduced a bill designed to reform the state’s controversial Alabama payday loans.
Barron said payday lending can trap borrowers in a cycle of debt. Payday loans, which are short-term loans typically for $1,500 or less, are intended to bridge the borrower’s cash flow between paydays.
“It is my opinion that we need to address some workable reforms to the [payday cash loan] industry,” Barron said.
Barron himself came under fire for owning a number of “fast cash” operations during the last election, though he reported he sold his interests in 20 such businesses. He voted to approve a bill four years ago that placed some regulations on the previously unregulated payday loan industry. The 2003 bill allowed the businesses to charge 17.5 percent interest per transaction.
“I felt that the regulations we enacted [then] made a drastic and positive impact for consumers,” he said.
Barron said his new reform bill would give the customer a one-day right to rescind the cash advance payday loan and prohibit rollovers or renewals. The bill would also require all lenders to offer an extended payment plan with no additional interest charges to customers at any time if they are unable to repay the loan – which Barron said would eliminate the cycle of debt incurred by many consumers.
Barron’s bill would ban all military payday loans. Starting Oct. 1, a federal law restricts the interest charged to military personnel to 36 percent.
“I thought we would go a step further,” Barron said.
Sen. Bradley Byrne, R-Fairhope, has also introduced a bill that would repeal the 2003 legislation and put no faxing payday loan businesses under the ASL act.
“[This bill] would repeal the payday loan act and regulate the industry under the small loan act, and I say that this proposal is not the answer,” Barron said. “Right now, the consumer has choices when it comes to unsecured, short-term borrowing.”
Barron said regulating an industry using an act that was not designed for that purpose would not be successful.
“I encourage my colleagues not to throw the baby out with the bath water,” Barron said. “The payday loan industry needs reform, not elimination.”