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Committee Approves Pay Day Loan Bill

By Brandon Moseley
Alabama Political Reporter

For years, the Alabama legislature has been divided between those who want to shut down the State’s pay day loan industry, and those who believe in a free market approach with no State interference.  Senate Bill 91 is an attempt by Senator Arthur Orr (R-Decatur) to take a “middle path.”

On Wednesday, February 17, the Senate Banking and Insurance Committee gave a favorable report to Orr’s legislation.

Senator Orr said, “I do not want to drive lenders out of business.”

paydaySen. Orr said that his legislation is based on the Colorado model, and is not aimed at trying to run people out of the business.  Orr’s bill would end the requirement that the loan be paid off at the end of the month, and extend the terms of repayment to six months.  Orr would limit the interest rates on the loans to just 180 percent on an annual basis, which is down markedly from the existing 456 percent under current law.

Senator Orr said that the database on pay day loans the legislature created last year has told us several things.  In the last six months Alabamians have taken out over a million pay day loans for a total value of $355 million.  Only 20 percent of those were first time borrowers.  The average loans is renewed 5.5 times generating $65 million in fees alone.  The average loan is $325.

Sen. Bill Holtzclaw (R-Madison) said that this is not an easy issue.  This is going to exist if it is regulated or not.

Sen. Quinton Ross (D-Montgomery) said that the state needed to raise the minimum wage if it wanted to help the people deal with skyrocketing food costs.

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Sen. Tom Whatley (R-Lee County) asked if some of the small lenders would go out of business if this passed.

Orr said that in Colorado some of the lenders did go out of business after this passed.

Sen. Whatley said that he is opposed to anything that puts small businessmen out of business and that he is voting no.

Senators Whatley, Holtzclaw, and Shay Shelnutt (R-Trussville) voted against, but they were narrowly outvoted by the Senate Banking and Insurance Committee which gave the bill a favorable report.  The payday loans industry opposes tighter requirements on their operations.

The bill now goes to the full Senate.

Written By

Brandon Moseley is a former reporter at the Alabama Political Reporter.

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