Volume
1 Issue 1 - March 2001
Predatory Lending
Payday/predatory lending - is a hot potato in this legislative session. For the last two years Senator Roger Bedford (D-Russellville) has attempted to pass legislation under the cloak of "consumer protection" which does more to hurt consumers than help. The legislation, or "legal loan-sharking" as characterized by Rep. John Knight, (D-Montgomery) would allow check-cashers or payday lenders to receive up to 1200 percent returns on small loans from the retired and working class people who can least afford to pay. It is widely suspected that banks outside of the state fund these facilities in order to get around the restricted 36 percent annual percentage rate banks can charge. Trial lawyers do not oppose this bill because several would profit greatly from their ownership of check cashing and payday lending businesses. Of course, we expect to see this legislation again this year, and it will be one of the hot potatoes of this session. A likely solution would be for Speaker of the House, Seth Hammett, to appoint an ad hoc committee to study this subject and make recommendations as to how consumers, payday lenders and the banking industry can best address this problem. In an editorial last year, The Birmingham News said it best. "Payday lenders and auto title pawn shops, with their outrageous rates, shouldn't be allowed to feast on the poor." Fortunately, over the past two years, Representatives Knight and William Parker, (D-Birmingham) have been successful in defeating the legislation.
[Editor's Note: We made a request to Governor Don Seigelman's chief of staff, Paul Hamrick, for an article from the Superintendent of Banking on Predatory Lending. To date, we have not received any response from our request. If we receive one we will publish it in a future edition.]
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