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Using heart not head, major flaw in payday lending debate

Bill Britt



By Bill Britt
Alabama Political Reporter

A report by Jonathan Lee, writing for the Mises Institute located in Auburn, lays bare the flawed economic thinking of those who oppose small, short-term consumer lenders, such as payday and title loans.

“[P]olicymakers are thinking with their hearts while sitting in their air-conditioned offices, away from the facts and any form of interaction with the real world of short-term loans,” Lee states.


Using words like “predatory lending” and “price-gouging,” left-leaning special interests, and even the Consumer Financial Protection Bureau founded under the guidance of Democrat United States Senator from Massachusetts Elizabeth Warren, ignore economic realism while promoting a nanny-state wisdom that undercuts the basic understanding of market-based capitalism.

“Instead of pointing fingers and name calling at the short-term lending industry, they should be applying simple economics to their proposals to see if they hold water,” Lee writes.

Regarding a June 2016 proposal by the CFPB, Lee examines a paper released by the CFPB and PEW Charitable Trusts, that aims to add credence to a call for new regulations on the small-lending industry.

The joint study argues, “[W]ith payday and vehicle title loan markets, lenders’ and borrowers’ interests are not aligned because profitability for lenders depends on loans being unaffordable for customers.” However, Lee points out that, “this argument stand for any industry that sells a product?”

Using the iPhone as an analogy, Lee writes, that an iPhone 6 costs approximately 200 dollars to produce but sells for 699 dollars or three times that amount it cost to build.

“To borrow a phrase from the left, that’s ‘price-gouging’ to the tune of 300 percent,” Lee writes. “Yet there is no noise from policymakers claiming to call Apple a company that cheats its customers.”

He further questions why short-term lenders are, “held accountable in any way that is different than Apple?”

Here again, Lee questions the logic of those who wants to deny short-term lenders the right to charge interest rates that serve as a buffer to the risk of extending credit to low-income borrowers.

But perhaps more shocking is Lee’s citing a study that was hidden from public view because it showed that 98 percent of those surveyed were positive about their payday lending experience. The survey’s results were closely guarded until a Freedom of Information Act request exposed the real results.

CFPB ignored positive payday loan customer ‘Tell Your Story’ testimonials

CFPB’s “Tell Your Story” portal received 12,308 comments praising the payday lenders, with fewer than 240 customer comments – less than two percent – being negative. Of the 240 negative comments, 84 comments were mistakenly categorized as payday lending and were actually complaints about banks, insurance complaints and student loan complaints.

Of course, this is only one example of do-gooders hiding or misrepresenting facts to promote their agenda to destroy small lending operations in Alabama and the nation.

A few Alabamians agreed to share their experience with payday lending, and they mirror many of the comments hidden by the CFPB.

Forest, a 30-something from Tuscaloosa, when asked if he understood the interest rates associated with a payday loan said, “Oh yeah, most definitely. I mean, they have charts literally all over the walls that tell you the terms, and then they tell you the terms. And then they hand you a contract that tells you the terms. I mean, if you can’t read it, you know, then that’s on you.”

Forest borrowed 300 dollars for repairs on his truck. “I needed some money to get my truck fixed, and I did not – didn’t have the $300 to do it. If I wouldn’t have my truck fixed, I would have lost my job. I would not have money the next week for, you know, for my daughter and everything else.”

Lola, an older Birmingham resident, said she knew what she was getting into and was happy with her experience. When asked why she chose payday lending she said, “Say, like a month, and you did not have it to pay a light bill, or maybe you needed it for groceries. I mean, they let you have it where, otherwise, you would not have it.” She further explained, “Family members cannot always help you, and they will let you have it and pay it back before the month is out. That’s what they do here. If you need $150 or $200, and that’s all you needed for the month, they don’t try to push you and get you to borrow more.”

Lee believes that by withholding information, the CFPB reveals its true intentions.

“This holding back of information demonstrates that the Bureau is not truly searching to help the people it says it wants to help. Rather, they have a keen eye for policy symbolism, and the flash of ‘fighting for the underdog’ when in fact they are irreversibly harming them while sticking a knife in their back.”

As the elderly Lola said in her interview, “You have more to do up there in the Legislature; there’s a lot of other things you could be doing besides meddling in this. And there’s a lot of people that are poor, or they don’t make enough, they need these places like this so that they can borrow.”

The Mises Institute located adjacent to  the campus of Auburn University, “exists to promote teaching and research in the Austrian school of economics, and individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.”

Interviews were conducted by industry leaders and were found on Youtube.

Bill Britt is editor-in-chief at the Alabama Political Reporter and host of The Voice of Alabama Politics. You can email him at [email protected] or follow him on Twitter.

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House passes General Fund Budget

Brandon Moseley



By Brandon Moseley
Alabama Political Reporter

The Alabama House of Representatives passed the state General Fund Budget on Tuesday.

The General Fund Budget for the 2019 fiscal year is Senate Bill 178. It is sponsored by Sen. Trip Pittman, R-Montrose. State Rep. Steve Clouse, R-Ozark, carried the budget on the House floor. Clouse chairs the House Ways and Means General Fund Committee.


Clouse said, “Last year we monetized the BP settlement money and held over $97 million to this year.”

Clouse said that the state is still trying to come up with a solution to the federal lawsuit over the state prisons. The Governor’s Office has made some progress after she took over from Gov. Robert Bentley. The supplemental we just passed added $30 million to prisons.

The budget adds $50 million to the Department of Corrections.

Clouse said that the budget increased the money for prisons by $55,680,000 and includes $4.8 million to buy the privately-owned prison facility in Perry County.

Clouse said that the budget raises funding for the judicial system and raises the appropriation for the Forensic Sciences to $11.7 million.

The House passed a committee substitute so the Senate is either going to have to concur with the changes made by the House or a conference committee will have to be appointed. Clouse told reporters that he hoped that it did not have to go to conference.

Clouse said that the budget had added $860,000 to hire more Juvenile Probation Officers. After talking to officials with the court system that was cut in half in the amendment. The amendment also includes some wording the arbiters in the court lawsuit think we need.

The state General Fund Budget, SB178, passed 98-1.

Both budgets have now passed the Alabama House of Representatives.

The 2019 fiscal year begins on Oct. 1, 2018.

In addition to the SGF, the House also passed a supplemental appropriation for the current 2018 budget year. SB175 is also sponsored by Pittman and was carried by Clouse on the floor of the House.

SB175 includes $30 million in additional 2018 money for the Department of Corrections. The Departmental Emergency Fund, the Examiners of Public Accounts, the Insurance Department and Forensic Sciences received additional money.

Clouse said, “We knew dealing with the federal lawsuit was going to be expensive. We are adding $80 million to the Department of Corrections.”

State Representative Johnny Mack Morrow, R-Red Bay, said that state Department of Forensics was cut from $14 million to $9 million. “Why are we adding money for DA and courts if we don’t have money for forensics to provide evidence? if there is any agency in law enforcement or the court system that should be funded it is Forensics.”

The supplemental 2018 appropriation passed 80 to 1.

The House also passed SB203. It was sponsored by Pittman and was carried in the House by State Rep. Ken Johnson, R-Moulton. It raises securities and registration fees for agents and investment advisors. It increases the filing fees for certain management investment companies. Johnson said that those fees had not been adjusted since 2009.

The House also passed SB176, which is an annual appropriation for the Coalition Against Domestic Violence. The bill requires that the agency have an operations plan, audited financial statement, and quarterly and end of year reports. SB176 is sponsored by Pittman and was carried on the House floor by State Rep. Elaine Beech, D-Chatham.

The House passed Senate Bill 185 which gives state employees a cost of living increase in the 2019 budget beginning on October 1. It was sponsored by Sen. Clyde Chambliss, R-Prattville and was being carried on the House floor by state Rep. Dimitri Polizos, R-Montgomery.

Polizos said that this was the first raise for non-education state employees in nine years. It is a 3 percent raise.

SB185 passed 101-0.

Senate Bill 215 gives retired state employees a one time bonus check. SB215 is sponsored by Senator Gerald Dial, R-Lineville, and was carried on the House floor by state Rep. Kerry Rich, R-Guntersville.

Rich said that retired employees will get a bonus $1  for every month that they worked for the state. For employees who retired with 25 years of service that will be a $300 one time bonus. A 20-year retiree would get $240 and a 35-year employee would get $420.

SB215 passed the House 87-0.

The House passed Senate Bill 231, which is the appropriation bill increase amount to the Emergency Forest Fire and Insect and Disease Fund. SB231 is sponsored by Sen. Steve Livingston, R-Scottsboro, and was carried on the House floor by state Rep. Kyle South, R-Fayette.

State Rep. Elaine Beech, D-Chathom, said, “Thank you for bringing this bill my district is full of trees and you never know when a forest fire will hit.

SB231 passed 87-2.

The state of Alabama is unique among the states in that most of the money is earmarked for specific purposes allowing the Legislature little year-to-year flexibility in moving funds around.

The SGF includes appropriations for the Alabama Medicaid Agency, the courts, the Alabama Law Enforcement Agency, the Alabama Department of Corrections, mental health, and most state agencies that are no education related. The Alabama Department of Transportation gets their funding mostly from state fuel taxes.

The Legislature also gives ALEA a portion of the gas taxes. K-12 education, the two year college system, and all the universities get their state support from the education trust fund (ETF) budget. There are also billions of dollars in revenue that are earmarked for a variety of purposes that does not show up in the SGF or ETF budgets.

Examples of that include the Public Service Commission, which collects utility taxes from the industries that it regulates. The PSC is supported entirely by its own revenue streams and contributes $13 million to the SGF. The Secretary of State’s Office is entirely funded by its corporate filing and other fees and gets no SGF appropriation.

Clouse warned reporters that part of the reason this budget had so much money was due to the BP oil spill settlement that provided money for the 2018 budget and $97 million for the 2019 budget. Clouse said they elected to make a $13 million repayment to the Alabama Trust fund that was not due until 2020 but that is all that was held over for 2020.

Clouse predicted that the Legislature will have to make some hard decisions about revenue in next year’s session.


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Day Care bill delayed for second time on Senate floor, may be back Thursday

Sam Mattison



By Samuel Mattison
Alabama Political Reporter

The day care bill, which would license certain day care centers in Alabama, was once again delayed on the state Senate floor after one lawmaker requested more information.

Its brief appearance Tuesday ended with state Sen. Gerald Dial, R-Lineville, saying a compromise had not yet been worked out with the bill’s detractors.


Alabama’s Senate has been hesitant to act on the legislation because of complaints of state Sen. Shay Shelnutt, R-Trussville, who has been an opponent of the bill since its introduction last year. The bill’s delay on Tuesday marks the second time its been taken off the Senate’s agenda.

The bill has had a rocky time in this year’s session, but the bill’s sponsor state Rep. Pebblin Warren, D-Tuskegee, said she is still confident about its passage out of the Legislature.

Warren, D-Tuskegee, filed the bill this session with the support of influential lawmakers including Gov. Kay Ivey, who told reporters last year that she though all day cares should be licensed.

Mainly sparked by the death of 5-year-old boy in the care of a unlicensed day care worker, the bill had great momentum coming into this year’ session.

Despite the growing support from lawmakers, Religious groups had concerns that the bill would increase state-sponsored reach into religious day cares in churches and non-profit groups.

Spearheading the dissenters was Alabama Citizens Action Program, a conservative religious-based PAC.

Warren, proponents, and ALCAP announced a compromise to the bill while it was still in the Alabama House.

Announced by ALCAP originally, the new bill was a weaker version in that it did not require that all day cares in the state be regulated. Instead, religious-based day cares would only need to be registered if they received federal funds. At a Senate committee meeting in February, Warren said a similar requirement was about to come from federal law in Congress.

The bill moved through the House in a overwhelming vote in favor of the proposal and passed unanimously out of a Senate committee a few weeks ago.

Warren, speaking to reporters after its passage from the House, said she was unsure if the bill would encounter resistance in the upper chamber.

It was the Senate that killed the daycare bill last year amid a cramped last day where senators took the bill off the floor. The bill may face similar complications this year, as lawmakers seem to be preparing to adjourn within a few weeks.

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Fantasy sports bill fails on Senate floor

Sam Mattison



By Samuel Mattison
Alabama Political Reporter

Would-be Fantasy Sports players in Alabama will have to wait to legally play in the state following a Senate vote on Tuesday.

The Alabama Senate decisively killed a bill to exempt fantasy sports from the state’s prohibition on gambling.


Not even entertaining a debate on the Senate floor, the proposal was killed during a vote for the Budget Isolation Resolution, which is usually a formality vote preluding a debate.

Fantasy sports are contests where participants select players from real teams to compete on fantasy teams using the real-world players’ stats.

Since 2016, the practice has been illegal in Alabama following a legal decision by the Attorney General’s Office that categorized it as gambling.

The bill’s sponsor, state Sen. Paul Sanford, R-Huntsville, predicted the bill’s failure during a committee meeting two weeks ago, where the bill passed unanimously.

Sen. Paul Sanford speaks to reporters after a Senate Committee meeting on Feb. 28, 2018. (Samuel Mattison/APR)

Speaking to reporter’s after the committee meeting, Sanford said the decision to file the bill was mainly a philosophical belief that the practice shouldn’t be illegal.

Sanford, a fantasy sports player before its ban, said that fantasy sports are a way to bring people closer together and not a means to win money. The Huntsville senator is not seeking re-election.

The bill’s failure in the Senate follows its trajectory last year too. A similar version of the bill, also sponsored by Sanford, failed in the Senate during the final days of the 2017 Legislative Session.

Since Sanford is retiring, it is unclear if the bill will even come back next session, or if it will even have a Senate sponsor.

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Using heart not head, major flaw in payday lending debate

by Bill Britt Read Time: 5 min