Payday, title loan reforms face uncertain future after Alabama House committee hearing

Payday and auto title lending reform bills were dealt a serious blow in an Alabama House committee Wednesday. Members of the House Financial Services Committee sent the payday loan bill to a subcommittee and deferred action on the title loan bill. The moves came after seven people testified in support of the payday loan bill during a public hearing.

The decisions were frustrating to advocates pushing the bills, both of which would cap annual interest rates on payday and title loans at 36 percent APR. State law now allows payday lenders to charge up to 456 percent APR, while title lenders can charge up to 300 percent APR.

HB 145, sponsored by Rep. Patricia Todd, D-Birmingham, would cap the rate on payday loans and create a uniform statewide database of such loans to help ensure compliance with existing state law that allows borrowers to take out a total of no more than $500 of payday loans at one time.

HB 406, sponsored by Rep. Rod Scott, D-Fairfield, would cap the rate on auto title loans and require lenders who repossess and sell borrowers’ vehicles to return sales proceeds that exceed the amount owed and other reasonable expenses. More than half of the House’s members are co-sponsors of Scott’s bill.

The same House committee sent similar bills to a subcommittee last year. Those bills saw no further action.

Only one person testified against HB 145 on Wednesday. A payday loan store owner from Birmingham said his stores provided a needed service to borrowers who understood the risks. Seven other speakers braved inclement weather to testify in favor of the bill, but the panel was not persuaded to send the measure to the House floor for full debate.

Rep. Thad McClammy, D-Montgomery, did much of the talking during the hearing, wondering aloud about borrowers’ motivations to take out payday loans. He referred numerous times to the high cost of parking tickets and the unexpected expenses related to having a vehicle towed. He also emphasized that removing payday and title loans from Alabama would not eliminate all poverty.

The committee voted after the hearing to send Todd’s HB 145 to a subcommittee after a motion made by Rep. Oliver Robinson, D-Birmingham, and seconded by Rep. DuWayne Bridges, R-Valley. The panel took no action on Scott’s HB 406, the title lending reform bill. The bill could return for committee consideration as soon as next week, but that is not guaranteed.

The public hearing on HB 145 didn’t begin until 45 minutes into the meeting due to lengthy consideration of a handful of relatively non-controversial measures. Speakers were limited to three minutes each, and a time shortage meant a scheduled public hearing on HB 406 never happened.

The Legislature will return Thursday for the 14th of 30 allowable meeting days during the 2014 regular session, which is expected to last until early April.

By Stephen Stetson, policy analyst. Posted Feb. 12, 2014.