Appleseed talks reform effort in Andalusia program

Alabama Appleseed brought its effort to effect predatory lending reforms in Alabama to Andalusia last night, speaking to a small group in an event sponsored by the local Episcopal and Catholic churches.

Alabama Appleseed organizer Dana Sweeney said the state organization has worked to get legislation passed that would increase the term of repayment for the short-term loans to 30 days. Sweeney explained that payday loans are defined as short-term, high cost loans that are due to be repaid on the next payday.

“Borrowers present either a post-dated check, or provide direct access to withdraw funds at the time of th loan,” he said. “The lenders do not assess the borrower’s ability to repay a loan.”

In Alabama, payday lenders can charge annual percentage rates of up to 456 percent, he said. Efforts to reform the lending practices previously have died in the Alabama legislature.

“This quickly becomes a problem,” he said. “The loans are generally for two weeks, or until the next payday. If they are not able to repay by the initial due date, extra fees are charged to roll over another two weeks. Debt grows and grows and grows, quickly ballooning.”

The Alabama State Banking Department in 2015 established a central database where payday lenders must send reports. According to the department, in the 2017 fiscal year, 214,429 Alabamians took out more than 1.8 million payday loans, paying more than $107 million in fees.

“Most of money (profit) is not staying in Alabama,” Sweeney said. “There are a number of these franchises, but none of them are headquartered here.”

Research shows that every $1 repaid to a payday lender takes $2 in spending out of a local economy.

Appleseed is lobbying for SB 138, sponsored by Sen. Arthur Orr, R-Decatur, which passed the Senate last week and is now in committee in the House.

“For the most part, the bill doubles the amount of time to repay the loan,” Sweeney said. “Having 30 days to get two paychecks means a greater chance the borrower can repay the loan in full.

“This would effectively cut the interest rates people are experiencing in half,” he said. “There will still be triple digit, excessive rates, but halving them makes a difference.”

The bill has received bipartisan support.

“It is assigned to the House Financial Services Committee,” he said. “After it comes out of committee, Rep. (Mike) Jones will have influence over what happens next.”

Jones chairs the agenda-setting Rules Committee in the House.

Sweeney said some Alabama communities have established moratoriums on preventing the licensing of additional payday lenders in a city.