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Orr wants more Sanders/Warren-style regulations

Bill Britt

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Once again, Sen. Arthur Orr, R-Decatur, will join forces with left-leaning organizations to impose more regulations on payday lending in the upcoming legislative session.

While the Trump Administration over the last three years has taken giant steps toward rolling back Obama-era regulations, Orr is taking a page from Democrat senators and presidential hopefuls, Bernie Sanders and Elizabeth Warren, to promote legislation that will place greater burden on businesses, endanger Alabama’s free-market economy and drive small loan borrowers to unregulated online lending sources.

Beyond denying consumers direct access to readily available small loans at stores where they regularly do business, Orr’s legislation will also endanger some of those businesses’ very existence resulting in a loss of jobs.

Job growth, available credit and protection for individuals and business has been a hallmark of the Trump presidency, but Orr and his supporters would turn back the clock on those accomplishments.

Orr’s efforts are said to be aimed at protecting consumers from predatory lenders. Speaking of his 30 days to pay bill in 2019, he said not only would the legislation give people longer to pay off their debt it would, “lowers the APR in excess to 450 percent, down to a little over 200 percent.”

But the type of loans Orr is talking about don’t charge an annual percentage rate.

According to the Alabama State Banking Department, payday lenders do not charge an APR but a flat fee of $17.50 per $100 borrowed. The average loan in 2019, according to the latest report from the banking department, was $348, which is consistent with the historic average loan amount. The average fee is just under $60.

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Orr and those who support his legislation casually throw around words like “APR,” “predatory lending” and “price-gouging,” while falsely claiming that payday lenders charge up to 456 percent APR. Such inflammatory rhetoric is used to incites those who don’t understand how the industry works.

Deferred presentment loans are high risk and generally used by those who have immediate needs but less than excellent credit.

“People do not turn to payday lenders because they temporarily misplaced their American Express Platinum cards,” writes Kevin D. Williamson in National Review. “Borrowers turn to payday lenders because those are, as the borrowers calculate, their best alternative — maybe their best bad alternative, but their best alternative nonetheless.”

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Orr and others who claim to be protecting Alabamians from payday lenders seem to think that borrowers are ignorant of the fees they pay for these temporary short-term loans, but they are not.

A survey conducted by Pollfish for lendedu.com found that 82.00 percent of payday loan borrowers looked at the fees before taking out a loan, while 18.00 percent did not.

“All that silly talk about ‘predatory’ lenders is little more than rhetorical cover for the patronizing insistence that poor people are too stupid or dysfunctional to make their own financial decisions,” writes Williamson.

The report by the banking department shows that August is the most active month for those seeking short-term loans, which coincides with “Back to School,” which shows that these borrowers are not exercising poor financial behavior but using available resources to meet an essential need for their children.

Five years ago, lawmakers passed legislation to drive rouge lenders from the state and establish a database to keep a check on payday lending. A recent report from the state’s banking department shows the Legislature’s commonsense approach to regulating payday loans is working.

Before the establishment of the unified state database, there were more than 1,150 deferred presentment locations statewide today; there are approximately 600 lenders.

The deferred presentment industry, as it is called, is highly regulated by the Alabama Department of Banking, with regular audits and violators punished for any misrepresentation or mishandling of loans.

In 2019, Orr said, “The legislation I carry is not to put the payday lenders out of business. It’s not to ban the product. But it is to give the borrower a little more time to repay the loan.” But his legislation will have a job-killing effect on some of the state’s lenders.

Industry leaders say some stores could close if Orr’s legislation passes. There are currently around 1,800 Alabamians directly employed at payday facilities across the state.

Alabama spends tens of millions on recruiting a few hundred jobs from out of state companies with the passage of Orr’s bill; jobs would be lost, undercutting the growth Alabama is currently experiencing.

Orr and his partners for the last several years have targeted payday lenders claiming they charge outrageous fees but not once has Orr or his allies taken on big banks.

A report by the FDIC shows that banks collect billions in overdraft fees.

“These banks drain billions of dollars annually from their customers through abusive overdraft fee practices, severely harming poor Americans and working-class families living paycheck to paycheck,” said CRL Senior Researcher Peter Smith, who authored the 2017 report. “Instead of serving families fairly, these banks are driving their customers deeper in a hole and often out of the banking system altogether.”

Also, Orr and his allies never talk about the staggering profits credit card issuers reap from fees or their enticements to borrow.

“Credit card companies rely on our foolishness to make money,” writes John Schmoll. “They’re counting on their cardholders to let self-control and wise spending go by the wayside.”

The two most abundant revenue streams for traditional credit cards are fees and interest, which produced a combined $178 billion in revenue for credit-card companies in 2018, according to estimates from the industry consulting firm R.K. Hamme, as cited by Alex Morrell in Business insider.

Somehow, Orr and the left-leaning groups that support him never mention the fees, interest-rates, and overdrafts used by big banks to make money.

As Williamson writes, “But in the long term, we are going to have to answer the question of just how patronizing we intend to be toward people with low incomes and modest means.”

Warren is the mother of the Consumer Financial Protection Bureau which has worked to dismantle small lending institutions through its ubiquitous powers. CFPB has been a main target of Trump’s deregulation efforts.

Both Sanders and Warren have made attacks on financial institutions a part of their presidential agenda which is aimed at wealth redistribution. This, too, is anathema to President Trump’s supporters. That Orr embraces similar regulatory acts is foreign to most Alabama Republicans.

Will the Alabama Legislature, let the free market determine loan values, or will the Warrens of the world with their ideologically driven regulators like Orr decide markets?

Orr’s legislation will soon appear before the Senate Banking and Insurance Committee chaired by Sen. Shay Shelnutt, R-Trussville.

The question before Shelnutt and other Republicans on the committee is, will they side with President Trump and his push to stop job-killing-nanny state regulations, or will they join with the Sanders-Warren faction of the Democratic Party to regulate every action of Alabama’s citizens?

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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Economy

New unemployment claims continue to drop

Micah Danney

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(STOCK PHOTO)

There were 11,692 unemployment claims filed in Alabama last week, down from 17,439 the previous week, according to the Alabama Department of Labor.

Seventy-six percent of the claims from July 26 to Aug. 1 were related to COVID-19, according to the Alabama Department of Labor. That compares to 89 percent the week before.

New claims increased over the first half of July but declined in the second half.

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Economy

Alabama Power is returning $100 million to customers

Brandon Moseley

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The Alabama Public Service Commission approved a plan Tuesday to credit Alabama Power Company customers on their October bills. The move returns approximately $100 million to Alabama Power Company customers.

“Putting money back into the pockets of hard-working Alabamians is one of the ways we can help on the road to recovery,” Public Service Commission President Twinkle Andress Cavanaugh said on social media. “Alabama Power to refund $100 million to customers.”

The typical Alabama Power customer will receive a $25 credit on their October bill. The newly approved credit is on top of a 3 percent rate reduction that customers are already enjoying in 2020. This previous rate cuts and the October credit amount to about $300 million in savings for Alabama Power customers this year.

“We appreciate the commission voting today to expedite this credit for our customers,” said Richard Hutto, Alabama Power’s vice president of regulatory affairs.

The global economic collapse due to the COVID-19 pandemic has hurt people across Alabama. It has also dramatically lowered fuel costs for Alabama Power Company’s plants.

A typical residential customer using 1,000 kilowatt-hours of electricity per month is expected to receive a credit of $25. Customers who use more energy will receive a larger credit. Customers who use less power receive a smaller credit but had a smaller bill to begin with. Adjustments to fuel costs are typically calculated at the end of the year, with savings passed to customers beginning in January, but due to the economic downturn and pandemic-related job losses, Alabama Power and the PSC are rushing that money to Alabama families and businesses.

“Many of our customers have been hurt by COVID-19. We hope this credit will provide some additional relief at this difficult time,” Hutto explained.

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The 3 percent rate reduction, that took effect in January, was based on earlier estimates of lower costs for fuel and other expenses for 2020. The rate reduction alone equates to about a $4.50-per-month reduction for the typical residential customer.

“Our employees are working every day to keep costs low while providing industry-leading reliability for our customers,” Hutto added.

Alabama Power said in a statement that their total retail price is below the national average and has been for decades. When adjusted for inflation, the price customers pay for electricity is lower today than it was 30 years ago.

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Alabama Power has been assisting customers in other ways during the COVID-19 outbreak. Since the start of the pandemic, the company has suspended disconnects and late payment fees for customers hurt by the coronavirus.

Cavanaugh is seeking another term as president of the Commission.

“It is crucial that we have strong pro-jobs conservatives supporting President Trump’s agenda at all levels of government,” Cavanaugh said on social media.

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Economy

Payroll Protection Program deadline has been extended to Saturday

Brandon Moseley

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Congresswoman Martha Roby, R-Montgomery, this week reminded business owners that the deadline to apply for the Payroll Protection Program, knowns as the PPP, has been extended to Saturday.

“The Small Business Administration’s Paycheck Protection Program (PPP) application deadline was recently extended to Saturday, August 8,” Roby wrote in an email to constituents. “Do not forget to fill out your application if you are a small business that has been impacted by the Coronavirus pandemic.“

The PPP was a loan program administered by the Small Business Administration. It was part of the bipartisan CARES Act to address the economic collapse caused by the COVID-19 global pandemic and the forced economic shutdowns, which were implemented in the early months of the public health emergency in an attempt to slow the spread of the novel strain of the coronavirus and allow public health agencies and health care systems time to build up testing, contact-tracing and hospital bed capacity.

The PPP loans are 1 percent interest loans available through the SBA. If the business uses the money to make payroll and pay standard operating expenses then the loans will be forgiven. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. The loan forgiveness form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers.

The PPP has been very popular, so much so that that program ran out of money just weeks after Congress passed it. Congress had to go back and provide more funding for the PPP.

Businesses can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

Senate Democrats are meeting with the Trump Administration, Senate Republicans and House leadership on a compromise plan for a fifth coronavirus relief package. A big point of contention has been the size of the total package. Speaker of the House Nancy Pelosi, D-California, supports a $3.2 trillion coronavirus relief bill while Republicans prefer a more modest $1 trillion relief bill. The two sides are expected to continue to negotiate through Friday in an attempt to reach a compromise before the August recess.

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Roby is serving in her fifth term representing Alabama’s 2nd congressional district. She is not seeking re-election.

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Economy

State’s unemployment claims slowed last week

Last week saw the lowest number of new claims since the week-to-week number first spiked from 1,824 to 10,982 when the lockdown started in mid-March.

Micah Danney

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The number of unemployment claims in Alabama slipped last week after increasing through the first half of July.

There were 17,439 claims filed from July 19 to 25, according to the Alabama Department of Labor. Of those, 15,461, or 89 percent, were COVID-19 related.

Claims soared at the start of the pandemic in late March, hitting a weekly high of 106,739 in the first week of April. The rate of new claims declined sharply in May, with each week counting under 30,000 claims.

Since then, the number has decreased somewhat steadily. Claims rose several thousand over the course of this month, from 19,058 in the week ending July 4 to 23,678 in the week ending July 18.

Last week saw the lowest number of new claims since the week-to-week number first spiked from 1,824 to 10,982 when the lockdown started in mid-March.

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