BIRMINGHAM, Ala. – Alabama Rep. Patricia Todd expressed appreciation to members of a Senate committee that approved her bill that would create a state database on payday loans, and urged the entire Senate to support it as well.
The Senate Banking and Insurance Committee on last Tuesday in a 6-0 vote approved Todd’s bill, which would enforce an existing $500 limit on how much individuals can borrow at once from payday lenders. The bill sponsored by Todd, D-Birmingham, would set up a statewide database of payday loans through the Alabama Banking Department.
The measure now moves on to the full Senate. Todd’s bill passed the Alabama House of Representatives nearly two weeks ago by a vote of 93-1.
Current state law prohibits individuals from getting more than $500 in loans at one time. But Todd says without a central database, individuals can go to different payday lenders, obtaining multiple loans without exceeding the $500 cap. Without a database, payday loan customers can get trapped in an endless cycle of high-interest debts, Todd said.
“I am so proud of my fellow lawmakers for supporting this bill that will help keep individuals from getting overwhelmed by these high-interest loans,” Todd said.
Todd is seeking a third term representing Alabama House District 54, which includes the Birmingham communities of Avondale, Woodlawn, Crestwood, Forest Park, Roebuck and Huffman, and Center Point.
Under Todd’s bill, Lenders would have to enter information into the database every time someone tries to obtain a payday loan. Customers who already have a $500 loan would not be able to get one from another payday lender. The Senate committee amended Todd’s version of the bill to ensure the state takes competitive bids from vendors seeking to develop the database.
This is the third year that Todd has sought a law addressing payday lenders, an industry that has come under fire because of high interest rates. Todd said she is optimistic this time, adding she worked out a compromise with the payday industry and has gotten bipartisan support.
Payday loans are short-term loans of typically 30 days or less, with annual interest rates as high as 456 percent. Payday lenders say they fill a void that banks do not. Todd and other lawmakers for years have sought bills that would lower payday loan interest rates.
She obtained support this year by focusing on creating a state database. The Alabama Banking Department sought to set up a database last year, but the payday industry sued, and the database issue was put on hold pending a state trial this summer.
Todd’s bill would halt the lawsuit and get the database in operation by early 2015.
