Post by notknowmuch on Apr 14, 2013 6:04:16 GMT -7
Since the state legislature is under the sway of the predatory loan lobbyists, will Tuscaloosa do anything to ban these businesses?
Editorial: Legislature won't change shameful lending practices | The Montgomery Advertiser
Editorial: Legislature won't change shameful lending practices | The Montgomery Advertiser
If you think it’s OK for a lender to charge triple-digit interest rates, in some cases more than 450 percent annually, then you weren’t greatly troubled by yet another failure of the Alabama Legislature to end this horrific practice. You also likely have never been a customer of a payday loan or auto title loan operation.
If you had been, you would have at least seen, if not experienced, the dangerous spiral of debt that these unconscionable lending practices create for thousands of Alabamians. You might also wonder why your state allows them to continue when Florida, Georgia, North Carolina and Arkansas have barred them as impermissible exploitation, and when Congress acted to protect military families from them.
A sensible reform measure came before the House Financial Services Committee last week. The members heard testimony about the bill, which would cap interest rates on these loans at 36 percent, set a minimum loan term of 30 days, limit the number of loans allowed per year and establish a central database for these loans.
But nothing happened — again. As the Advertiser’s Brian Lyman reported, the bill was referred to a subcommittee, where it will almost certainly die — again. How fitting that the announcement came from the committee’s vice chairman, Rep. Lesley Vance, R-Phenix City, who is an undertaker.
Supporters of the status quo contend that such high rates are necessary because their Alabama customers aren’t considered good credit risks and can’t get loans anywhere else. However, there are plenty of people in Georgia, Arkansas, Florida and North Carolina who are in similar circumstances. Clearly, they have found workable financial solutions in their states. Could it be that loans can still be profitably made at much lower interest rates?
Supporters of the bill — yes, there are a few, despite the obvious influence of the payday and title loan businesses in the Legislature — note that Alabama’s current system sets the stage for deepening debt that can become inescapable. Supposedly, borrowers can’t roll over these loans, but because there is no central database of these loans, that provision is largely meaningless. A lender can legitimately say it has no record of a borrower’s loans with other lenders.
The short term of the loans — as little as two weeks — only exacerbates the rollover problem.
There are all sorts of fiscal reasons to enact these reforms, but there is also a powerful moral argument that, for all the high-toned talk in the Legislature, is repeatedly ignored. These practices are simply wrong, by any standard. Religions across the globe condemn usury, and that is exactly what this is.
If you had been, you would have at least seen, if not experienced, the dangerous spiral of debt that these unconscionable lending practices create for thousands of Alabamians. You might also wonder why your state allows them to continue when Florida, Georgia, North Carolina and Arkansas have barred them as impermissible exploitation, and when Congress acted to protect military families from them.
A sensible reform measure came before the House Financial Services Committee last week. The members heard testimony about the bill, which would cap interest rates on these loans at 36 percent, set a minimum loan term of 30 days, limit the number of loans allowed per year and establish a central database for these loans.
But nothing happened — again. As the Advertiser’s Brian Lyman reported, the bill was referred to a subcommittee, where it will almost certainly die — again. How fitting that the announcement came from the committee’s vice chairman, Rep. Lesley Vance, R-Phenix City, who is an undertaker.
Supporters of the status quo contend that such high rates are necessary because their Alabama customers aren’t considered good credit risks and can’t get loans anywhere else. However, there are plenty of people in Georgia, Arkansas, Florida and North Carolina who are in similar circumstances. Clearly, they have found workable financial solutions in their states. Could it be that loans can still be profitably made at much lower interest rates?
Supporters of the bill — yes, there are a few, despite the obvious influence of the payday and title loan businesses in the Legislature — note that Alabama’s current system sets the stage for deepening debt that can become inescapable. Supposedly, borrowers can’t roll over these loans, but because there is no central database of these loans, that provision is largely meaningless. A lender can legitimately say it has no record of a borrower’s loans with other lenders.
The short term of the loans — as little as two weeks — only exacerbates the rollover problem.
There are all sorts of fiscal reasons to enact these reforms, but there is also a powerful moral argument that, for all the high-toned talk in the Legislature, is repeatedly ignored. These practices are simply wrong, by any standard. Religions across the globe condemn usury, and that is exactly what this is.