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A bill to subject the payday loan industry to the regulation of the Small Loan Act is being introduced by Sen. Bradley Byrne (R – Fairhope) and has the support of Democratic Party Chair Joe Turnham and the Christian Coalition of Alabama.
The banking industry brought suit a few years ago charging that the payday loan industry was operating in violation of the Small Loan Act which limits the interest charged on loans to 36% annually. The case dragged on, and in the interim the legislature passed legislation which specifically removed the industry from the oversight of the Small Loan Act. That legislation allowed payday loan lenders to charge $17.50 for a $100 loan that may be only for two weeks, which amounts to an annual interest rate of over 400%. Sen. Byrne now says he made a mistake supporting the legislation.
Afterward, the courts ruled that payday loans had been subject to the terms of the Small Loan Act up until the time that the new legislation passed.
I know one policy analyst who keeps up with these things who had speculated that the Legislature, having given the authorization for payday loan lenders to operate as they do now, may be reluctant to repeal that authorization.
But there appears to be some momentum toward doing just that… GOP Senator Byrne, Democratic Party Chair Turnham, and the Christian Coalition of Alabama? That’s some broad support.
Don’t expect the industry to go away quietly into the night…
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[...] Payday Loans Attract InterestThe banking industry brought suit a few years ago charging that the payday loan industry was operating in violation of the Small Loan Act which limits the interest charged on loans to 36% annually. The case dragged on, … [...]
[...] Payday Loans Attract Interest [...]
[...] Payday loans. I would hope that no readers of this blog have ever used a payday loan. In essence they are used by people who a) have no savings in the bank b) who always seem to have more month left over than paycheck and c) who have no concept of a 200% – 1000% interest rate. Fortunately the U.S. Congress is stepping in to limit the interest rates to a mere 36%. The bottom line is that these payday loan lenders found a niche exploiting the poor and financially uneducated. This is one government intervention I endorse. [...]
[...] March 8, 2007 Payday loans… again Dan on 2007-03-08 @ 12:03 am So there’s now a bill which will bring the payday loan industryunder the control of the Small Loans Act. The difference for the payday loan industry will be great. Currently, the payday loan industry has very little regulation. Danny at Doc’s Political Parlor tells us that it currently allows a $17.50 charge for a two-week, $100 loan — that adds up to an interest rate of over 400%! [...]
Sen. Byrne also wants to make it mandatory to recite the pledge of allegiance in the morning. At least his philosophy is consistent.
The Christian Coalition supports this? I guess John Giles was right; the organization has started acting way too much like Jesus. ;)
The real danger facing Byrne’s bill is whether Barron, as Rules Chair, will ever allow Byrne’s bill on the calendar. The Barron proposal is nothing more than repackaging a bad product, and clearly appears to be drafted by the payday loan industry (the bill if almost identical to other “reforms” proposed across the country by the industry). Consumer experts will quickly tell you that the only way to end the abuses by this industry is to cap interest rates. The Byrne bill would merely repeal the state’s Deferred Presentment Act (our payday loan regulatory statute), and transactions of that nature would be subject to the interest limitations of the Small Loan Act. Byrne’s bill has 23 co-sponsors, both GOP and Democratic and racially diverse. Everyone should contact their legislators and tell them to reject the sham that Barron is pursuing and support the Byrne proposal.
“The banking industry brought suit a few years ago charging that the payday loan industry was operating in violation of the Small Loan Act which limits the interest charged on loans to 36% annually.”
Of course they would say that. Its in there interest to do so.
Aren’t all suits brought because they are in the interest of the plaintiffs? That doesn’t mean they are wrong.
And in fact, the court agreed that the banking industry was correct.
I wouldn’t be surprised that the people behind the payday loan industry would be worried about this Bill. However, such a Bill would also catch in it’s net, reputable laon providers as well. I hope the powers to be don’t let this bill have a bad effect on good money providers.
I definitely wouldn’t expect the industry to go quietly into the night. In Ohio, the legislature passed a law capping the interest rates on payday loans at 28% APR (down from 391%). Subsequently, the payday lobby has mounted a campaign to overturn the law via “citizen referendum.” I use citizen in quotes because there are essentially no citizens involved in the campaign. It’s primarily an out-of-state lobby funded effort. The payday lobby has spent millions on advertising trying to convince Ohioans that 391% interest amounts to financial freedom and they’ve also gone to great lengths to lie to voters to get them to sign petitions (to get the issue on the November ballot).
391% interest is not freedom! Usury is not freedom! We need to end predatory payday lending in Alabama, Ohio and elsewhere across out great country! Vote Yes on Ohio Issue 5!
http://www.yesonissue5.org
Ohio voters are being deceived by the out-of-state payday lobby!
http://www.youtube.com/watch?v=zDoeXujagE4