Group: Payday loans hurt the economy – The Andalusia Star-News

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Appleseed discusses Andalusian program reform effort

Alabama Appleseed stepped up to carry out foreclosure loan reforms from Alabama to Andalusia last night, speaking to a small group at an event sponsored by the local Episcopal and Catholic churches.

Alabama Appleseed organizer Dana Sweeney said the state organization has worked to push through legislation that will increase the repayment term on short-term loans to 30 days. Sweeney explained that payday loans are defined as short-term, high-cost loans that must be repaid on the next payday.

“Borrowers either present a post-dated check or provide direct access to withdraw funds at the time of the loan,” he said. “Lenders don’t assess the borrower’s ability to repay a loan.

In Alabama, payday lenders can charge annual percentage rates of up to 456%, he said. Efforts to reform lending practices previously died in the Alabama legislature.

“It is quickly becoming a problem,” he said. “Loans are generally for two weeks, or until the next payday. If they are unable to repay on the original due date, there is an additional charge for deferral for an additional two weeks. Debt grows, grows and grows, exploding rapidly. “

The Alabama State Banking Department established a central database in 2015 where payday lenders are required to submit reports. According to the ministry, in fiscal year 2017, 214,429 Alabamians took out more than 1.8 million payday loans, paying more than $ 107 million in fees.

“Most of the money (the profit) doesn’t stay in Alabama,” Sweeney said. “There are a number of these franchises, but none of them are headquartered here.”

Research shows that every $ 1 repaid to a payday lender takes $ 2 out of expenses for the local economy.

Appleseed is lobbying for SB 138, sponsored by Senator Arthur Orr, R-Decatur, which passed the Senate last week and is now in committee in the House.

“For the most part, the bill doubles the loan repayment time,” Sweeney said. “Having 30 days to get two paychecks means a greater chance that the borrower can repay the loan in full.

“It would effectively halve the interest rates people are experiencing,” he said. “There will always be excessive triple-digit rates, but halving them makes the difference. “

The bill received bipartisan support.

“It is assigned to the House financial services committee,” he said. “After he leaves the committee, Representative (Mike) Jones will influence what happens next.”

Jones chairs the House Agenda Rules Committee.

Sweeney said some communities in Alabama have moratoriums on bans on allowing additional payday lenders in a city.

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