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Payday Loan Legislation gets favorable report

By Brandon Moseley
Alabama Political Reporter

Wednesday, May 10, 2017, the Senate Banking and Insurance Committee approve a plan to more closely regulate the Payday Loan business.

The Committee gave a favorable report to both Senate Bill 404 and House Bill 535. The two payday lender reform bills are the same plan, but SB404 was sponsored by state Senator Tom Whatley (R-Lee County) and HB535 by state Representative Danny Garrett (R-Trussville).

Senator Bill Holtzclaw (R-Madison) said, “I don’t want to do anything that regulates this out of existence,” because the business will only go to loan sharks.

According to information provided by the Committee, under the Whatley/Garrett plan: the term of the loans would be limited to 14 to 31 days; the not sufficient fund (NSF) fee would be $30; attorneys fees are capped at 15 percent of the loan; rollovers are eliminated; there is a 48 hour cooling off period between transactions; after 12 transactions within the previous year, the customer must wait for at least 14 days before a new loan; and after six loans in a year the lender is required to notify the customer of any installment products offered by the lender; and payday loans must not be used to pay installment loans. Under SB404 and HB535 on or before the loan is due and the customer informs the lender that they can’t pay the lender must offer the customer a 60 day extension. The repayment plan is free; and the borrower must receive financial literacy education or materials improved by the state banking department. The customer is entitled to only one extended payment plan per 12 month period. While under the extended payment plan the customer may not receive any loan from any lender. The Whaatley/Garrett plan also requires that any internet lenders be licensed by the state of Alabama. Any loan made by an internet lender that is not licensed is void.

Senator Arthur Orr (R-Decatur) has sponsored a competing bill, Senate Bill 284. The Orr bill was referred to the Senate Judiciary Committee, who referred it to Committee on County and Municipal Government who referred it to the Banking and Insurance Committee. There it was amended and substituted.

How to regulate or even whether or not to outlaw payday lending has been an issue facing the Legislature for the last six years.

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HB535 and SB404 both received a favorable report and could be on the Senate floor as early as today.


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

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