In Legislature, payday loan industry has more power than the poor

Alabama has more than its share of working poor, that is people who work hard but don’t make a living wage. Some are in that position due to bad decisions on their part. Others are in that position through no fault of their own.

Those scraping to get by might be able to make ends meet for a while, but life happens. Say the car breaks down. For most people, particularly those in the more rural areas, no means of transportation quickly turns into unemployment. Most in this situation don’t have the credit score necessary to take out a bank loan, and most banks aren’t looking to loan a lower-paid person a small personal loan of say, $500.

These are the people who turn to the storefront short-term loan places that dot strip malls throughout the state. It is a good thing that those in dire need have somewhere to turn. Unfortunately, in Alabama, that’s when they become prey for a vicious system that locks them into spiraling debt.

The Alabama Senate last Thursday passed a bill that would change that. It would outlaw the triple-digit interest rates that payday lenders often charge unsuspecting borrowers. The bill, sponsored by Sen. Authur Orr, R-Decatur, passed by a vote of 20-4. One of the four who voted against it was Tom Whatley, R-Auburn, who made a ridiculous and shameful hour-long filibuster on the Senate floor. Whatley complained that the reforms stopping the predatory practices would force some payday lenders to close up shop. According to news reports, he repeatedly read off the first names of people he said worked at payday stores in the state. That spectacle was almost as preposterous as the argument he tried to muster against the measure.

As it stands now, the loans can be for a term as short as 10 days and charge interest with rates as high as 437 APR. That forces many people to take out a second loan in an attempt to extend the time they have to pay it back. What that does is compound the problem even more, trapping them in a cycle of debt, where the initial $500 loan can end up costing thousands of dollars in the long run. Orr’s bill would require all loans to last 30 days, which would still allow the lenders to charge as high as 220 percent interest.

While Whatley can argue that the bill could cost employees of the payday loan offices their jobs, the state has a 3.5 percent unemployment rate that is at its lowest point in many years. There were about 1,200 of those places in Alabama in 2006. But that number has dropped to 630 licensed payday lenders. The Alabama State Banking Department started closely monitoring their loan activity with a statewide database in 2015.

Now, Orr’s bill moves on to the House of Representatives, where it is likely to die. At least, that’s what’s happened in the past.

The payday loan industry has more lobbying power than the state’s poor.