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Wednesday, April 6, 2016

Payday lending reform bill clears Senate, moves to House

Folks, if you want to know why Steven Ziaja an Alabama Law Enforcement Agent and his girlfriend Sheriff Ana Franklin put so much money into the pay day loan companies, you need only to read the payday lending reform bill that recently cleared the senate.  
Even if the reform bill is eventually accepted into law, here is what a borrower can expect to pay if the Bill sets the loan cap at $1,500.00:
Here is what you would pay should you borrow $1,500.00 with a 45% cap on the loan and you paid the loan back in six months:  Your monthly payment will be $283.82 and you will have paid $202.92 in interest.  Of course, if you don't pay it back in time or miss a payment, penalties kick in.
The way the payday loans currently work in Alabama is the lender loans the borrower $500.00 on a 14 day note.  The company charges $17.50 per $100.00: If the note is paid back within the 14 day time frame, you will have paid $87.50 for the privilege.
This example requires the borrower to repay the loan within 14 days. Things get a little sticky when you do not pay the loan back within the allotted time frame. Please read the fine print before you sign the contract. 

The interest rate continues to climb.  If the state could put a cap on the interest rate that would be wonderful, even though 45% interest still sound like a license to steal.  It sounds better than eventually paying 300 to 400 percent interest.  FYI if you borrow $500.00 and end up paying the $500.00 back plus 300% interest you will be paying Back $750.00.

Posted: Wednesday, April 6, 2016 12:10 am | Updated: 6:07 am, Wed Apr 6, 2016.

MONTGOMERY — People who borrow from payday lenders would have more time to pay back the loans under legislation approved Tuesday by the Alabama Senate.
Senate Bill 91 by Sen. Arthur Orr, R-Decatur, is modeled after a Colorado law and extends repayment periods from the current two-to-four weeks to six months. It also caps a finance charge at 45 percent, though additional fees could push the maximum allowable interest rates above that.

This is the first payday reform legislation to clear a legislative chamber in recent years.
“It allows the industry to continue, it allows a product that a lot of people rely upon for short-term loans, but it decreases the punitive nature of our current system,” Orr said after the vote.
The bill now moves to the Alabama House, where there is at least one other reform bill in play.
Advocates for reform have said Orr’s bill is a compromise. Currently, interest on loans can be more than 400 percent.
Kimble Forrister, executive director of the advocacy group Arise Citizens’ Policy Project, said Orr’s bill is meaningful reform.
“(It) would give payday borrowers a more realistic path out of debt by allowing them to make installment payments over time,” Forrister said in a written statement.
“The bill also would slash interest rates and place other overdue, common-sense limits on payday loans in Alabama.”
Orr on Tuesday fended off a few efforts to change his legislation, including an amendment to raise the current cap on payday loans from $500 to $1,500. That amendment was from Sen. Bobby Singleton, D-Greensboro.
“I know we have to do something about this industry … (but) there are people out there who are unbankable,” Singleton said.
Payday lenders have argued they serve customers others don’t and whose only collateral is a check.
Orr last month said information from the Alabama Banking Department’s lending database, which began collecting information last August, shows about 205,000 borrowers in the state have taken out about 1 million loans. The average amount is $325. About 70 percent of those loans are what Orr called rollovers, in which people don’t pay off the original loan and extend it.
Orr said in Colorado, a $300, two-week loan carries $16 in fees. In Alabama, the same loan costs $52.50.
Meanwhile, Alabama lenders charge more for loans than surrounding states do, Orr said Tuesday.
“Why is that?” Orr said. “Because we allow it.”

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