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Payday Lenders Unify Against Bentley’s Regulations

By Lee Hedgepeth
Alabama Political Reporter

MONTGOMERY, Ala. – Earlier this month, Governor Robert Bentley announced that new regulations would be rolled out by the Alabama Banking Department to help ensure that payday lenders comply with existing loan restrictions under the Alabama Deferred Presentment Services Act (ADPSA), a law that was aimed at curbing what Bentley described as “excessive amounts of debt from payday loans” by providing stricter guidelines for payday lending, and preventing multiple loans to a single individual.

Now, loan issuers from around the state have come together to sue the banking department in order to prevent those new regulations from being implemented.

Counsel representing loan companies such as Cash Mart, Rapid Cash, and Quick Cash have filed suit in the Montgomery County Circuit Court claiming that, among other things, the new restrictions are outside of the language of the ADPSA, and that Governor Bentley and the banking department are “usurp” the legislature by their course of action.

The crown jewel of the several new regulations arising from the Banking Department is a provision that would implement a database of all payday loans in the state, and require loan issuers to check the database, at a fee of one dollar per customer, to assure that the client was not being given multiple loans that could not be repaid, in compliance with the ASPDA.

In a press release announcing the new regulatory language, the Governor portrayed the new provisions as beneficial to both lenders and borrowers:

“First, this will protect consumers by helping them avoid excessive debt from multiple payday loans.”

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He then said that the “database will help lenders make sure that when they issue new loans, they are doing so in compliance with state law.”

However, the lenders do not quite buy into what the Governor is selling (or lending?).

They not only say that the database is extra-statutory, but that an imposition of a one dollar charge per customer is an illegal tax also not sanctioned by the legislature.

Outside of the legal realm, the groups claim that the regulations will drastically reduce access to what they claim are badly needed, highly demanded loan services.

For example, the payday lending advocate Borrow Smart has suggested that based on their experiences in other regions with similar regulations, the number of payday lenders could decrease by half.

Despite this, some states have implemented similar legislation that seems to point to pretty good results. Florida has a statute almost identical to Alabama’s, and regulations have, according to the state government, only increased transparency during the lending process.

In general, This regulatory battle puts some frequent state political actors in odd positions along their longtime adversaries. Alabama Appleseed, for example, a left-leaning social advocacy group has come out in support of Bentley’s recent decision.

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Litigation in the case against the State Department of Banking is still pending in the Montgomery County Circuit Court.

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