Council considers moratorium on payday loans
Published 11:20 pm Thursday, March 27, 2014
At the request of City Councilman Charlie Dunn, Troy City Council considered passing a moratorium on payday loans in the city.
“They’re taking advantage of low-income people that couldn’t afford to pay the high interest rates,” Dunn said.
Dunn asked City Clerk Alton Starling to draw up a draft of a moratorium and to look into the issue for him.
At a work session before this week’s city council meeting, Starling talked to the council about Alabama House Bill 145, which also addressed payday loans. It does not cover title loans.
The bill passed in the House 93 to 1 on March 13 and must next be passed by the Senate.
One of the biggest changes in the bill is the creation of a statewide database that would prevent people from taking out more than one loan at a time. The bill also makes it illegal for payday loan companies to knowingly loan money to anyone with an outstanding deferred loan of more than $500.
Payday loan companies often allow borrowers to pay the interest fees and rollover the principle for additional weeks. This bill would prevent more than one rollover.
Businesses will also have to provide customers with a detailed explanation of fees and due dates, written in understandable language.
According to the proposed bill, businesses will not be allowed to “engage in unfair or deceptive acts, practices, or advertising in the conduct of the licensed business” and cannot ask the customer to provide security for the transaction or require the customer to provide a guaranty from another person.
Councilman John Witherington had his reservations about passing any ordinances regarding the matter.
“An ordinance is permanent in nature. If we’re going to do a moratorium on this, why not other businesses?” he said. “We don’t have a moratorium on insurance agents. We don’t have a moratorium on lounges. We don’t have a moratorium on banks. And banks aren’t going to loan these people money. They’ve got to have somewhere to get it.”
City Councilman Marcus Paramore said a friend of his on the Montgomery City Council had looked into the same issue.
“They passed a moratorium for three months, came back and passed a moratorium for six more months. Now, instead of passing an ordinance they’re still monkeying with, they may have to do another moratorium,” Paramore said.
He said the council could not agree on the terms of the ordinance.
“If we do one, we need to wait and be on the same page,” Witherington said.
The council decided to table the discussion of a moratorium, pending what happens with HB 145.