Alabama Appleseed

In recent years there has been an escalation of predatory lending practices in Alabama with few consumer protections. For example, there has been a proliferation of finance and lending companies that offer payday and title pawn loans at exorbitant interest rates that trap consumers in a cycle of debt that is hard to end. Payday lenders in Alabama can charge an interest rate of up to 17.5%, which equates to 450% APR or greater and title pawn rates are approximately 300%.  In 2003, the Alabama Legislature passed a law that was supposed to regulate payday loans, but as passed it allowed this exorbitant interest rate and did not provide for a centralized database that would protect consumers against taking out multiple payday loans.
 
Alabama Appleseed’s advocacy to eliminate predatory lending practices begin in 2002 with an amicus curiae brief in the Alabama Supreme Court in a case trying to bring payday loans under the Alabama Small Loan Act. We were involved on a limited basis during the 2003 legislative session when the payday loan bill was considered and passed, but only played a limited role that year as another advocacy organization had been working on the issue for several years and was taking the lead in negotiating an acceptable bill to regulate payday lending. Since 2003, we have worked with several consumer advocacy groups to encourage passage of legislation to end predatory lending practices in Alabama. During the 2007 legislative session, we worked with two State senators and our coalition advocacy partners to develop and pass legislation that would either bring payday loans under the Alabama Small Loan Act (at a reasonable interest rate), or make substantive changes in the payday loan act that would greatly strengthen consumer protections for payday loans. However, principally due to the dysfunctional legislative processes in the Alabama Senate, that legislation did not receive full consideration and did not come up for a vote. In late 2007 and early 2008 we worked again with some of our coalition partners to make further refinements and changes to the draft legislation that was considered during the prior legislative session, but on advice of our legislative sponsor of our revised bill, that revised bill was not filed. We will continue to work with our coalition partners to have the bill ready for filing during the 2009 legislative session. In late March 2008, a bill providing for limited reforms of payday lending practices was introduced in the Alabama Senate. We are following the progress of tht bill and will become involved with suggesting changes to it if needed.

There is a need for further research to document the extent and impact of various types of predatory lending practices as they exist today in Alabama. We hope to be able to secure funding during the coming year to conduct this research. Currently, in an effort to strengthen our advocacy, we have undertaken a pilot research project in the Birmingham area to document the rate of bankruptcies filed by consumers who have taken out payday loans. We are being assisted in this project by several lawyers from the Adams Reese office in Birmingham on a pro bono basis, and on the suggestion and recommendation of one of these lawyers, we were awarded a small grant by the American College of Bankruptcy.  At this point we are working with the Adams Reese lawyers to examine the unsecured creditor claims schedules of bankruptcy petitions and to develop a questionnaire to send to local bankruptcy lawyers to gather anecdotal information regarding the correlation between payday loans and bankruptcy filings. We believe a published report on this topic, as well as on other Alabama-specific data on payday and title pawns loans, would materially aid our advocacy against predatory lending practices and serve to highlight the damaging effects of predatory lending practices in Alabama.