How payday lenders are getting their money’s worth in Alabama
(JD Crowe/[email protected])
A funny thing happened earlier this year when the payday loan bill popped up in Alabama House, but what was perhaps strangest was that the bill never first hit rock bottom. place.
There had been previous attempts to regulate payday lenders, but with little success. Bills usually died in committee. If they didn’t die there, they died with the Rules Committee, which sets the special order schedule, sort of a daily House agenda. They don’t reach the ground.
But suddenly it was there – a payday loan invoice – on the schedule of special orders.
The sponsor of the bill, Rep. Danny Garrett, R-Trussville, says it was probably a mistake. He had two bills before the Rules Committee that day and he thinks they put the wrong one on the calendar.
Most payday loan borrowers have two weeks to pay off their loans. Garrett’s bill would have extended that to three months. The effect would have been that, rather than 456 APR, payday loans would have fallen to 36%.
“They had indicated that one of my other invoices was going to be a priority invoice, but he [the payday lending bill] was on schedule, ”Garrett said. “At that point, I said let’s go. “
Before we get to what happened next with Garrett’s Bill, let’s stop to talk about what happened more recently.
Payday in numbers
For years, the payday loan industry fought the Alabama state banking department, which regulates financial institutions, and insisted that payday lenders enter their loans into a unified database.
It was already illegal for payday lenders to collectively lend more than $ 500 to one person, but without a unified database, lenders could claim ignorance if a customer had multiple $ 500 loans at the same time.
The Alabama Supreme Court ruled against the payday loan industry, and on August 10 the database went live.
Here’s what this database has already told us.
In the first 10 weeks, there were 462,209 transactions (loans).
Of these, the average size was $ 317.
Total loans plus fees were $ 172.1 million.
Approximate gross profit was $ 25.4 million.
If these numbers are typical for the rest of the year – which is prudent given what is likely to happen over the holidays – then the Alabamians are on course to take out about 2.4 million payday loans in one. year, for more than $ 890 million.
Obviously, many payday loan recipients refinance their debts, but it’s a payday loan for two people in the state.
And the payday lending industry will take in $ 132 million.
Looking at numbers like these, the $ 475,000 in campaign donations the industry gave to Alabama lawmakers in the last electoral cycle seems almost insignificant.
But it was enough.
Which brings us back to what happened next with Garrett’s payday loan bill.
Campaign pay day
Rep. Mike Hill, R-Columbiana, has offered to postpone the bill, this is how bills are killed when they hit the ground. Sometimes an invoice comes back after being posted, but rarely.
It should be noted that in 2002, when Hill was a Democrat, he sponsored the law that legalized payday loans and his 456 APR loans in Alabama.
In the last election cycle, Hill secured $ 14,250 from payday lenders and securities lending.
Rep. Mac McCutcheon, R-Huntsville, also asked to postpone the bill. McCutcheon chairs the Rules Committee and is one of the most powerful members of Alabama House after President Mike Hubbard, R-Auburn.
McCutcheon received $ 12,750 in donations from payday lenders and securities.
Hubbard, who received $ 37,835 from lenders, was not serving as a speaker at the time. He had left his chair, but was standing only a few feet away when Rep. Alan Boothe, R-Troy, took over.
There was a voice vote on the motion to defer the payday loan bill, and it doesn’t matter if the ‘no’s’ are stronger and outnumbered the ‘yes’, Boothe, who only received 3,500 $ from the lending industry said the “yes”. “prevailed.
And Garrett’s payday loan bill is dead.
At least it made it much further than a bill sponsored by Rep. Rod Scott, D-Birmingham, which would have regulated securities lending.
This bill had 67 of the 105 members of the House as co-sponsors and yet it never even got out of committee.
A little money can go a long way in the Alabama legislature, and unlike the over 2 million payday loans in this state, these lawmakers won’t have to give back a dime.
This debt has been paid in full.