Payday loan stats in Alabama staggering

Published 11:48 pm Thursday, October 29, 2015

The numbers are astonishing. In the first 10 weeks that payday lenders had to record their transactions on a statewide database, Alabamians took out 462,209 payday loans.
Based on those numbers, Alabamians are on course to take out just over 2.4 million payday loans on an annual basis.
An industry representative tried to defend payday loans, saying there’s little alternative for the 300,000 or so people who use the service in Alabama.
Max Wood, who owns Check Spot stores in a couple of cities, says the database, which is designed to keep people from amassing more than $500 in payday loans at one time, has caused many Alabama payday lenders to shut down already.
Wood says more than 200 licensed payday lenders have gone out of business in the last year alone.
He says other states that have enacted databases have seen the number of lenders shrink by 50 percent.
While it’s obvious Wood thinks the closures are a bad thing, others disagree. Shay Farley, legal director for Alabama Appleseed, says the state is “above the curve” in payday loan use.
Her organization has lobbied for stricter regulation of the industry, saying the loans create a debt trap when borrowers have to roll over the loans because they can’t repay the original amount borrowed. Payday lenders charge up to $17.50 per $100 for 10- to 14-day loans.
A borrowing limit was in place before the database was authorized, but lenders could simply say they didn’t know borrowers had more than $500 in loans and there was no way to check.
The payday lenders challenged the creation of the database in court but lost. Banking Department Superintendent John D. Harrison said the database is working. It’s blocked several loans because they were over the cumulative limit.
Repeat borrowers weren’t included in the numbers provided by the banking department, and Farley says that’s a key piece of the picture.
She says national data shows borrowers often have to come back eight times to clear their original loan.
We sympathize with folks who need an emergency loan. Many payday borrowers don’t have the ability to go to banks and borrow small amounts of money to carry them past a crisis.
We also know, however, the debt trap catches many, many people — often those who have the least comprehension of the obligation they’re incurring when they take out a payday loan.
We’ve often bemoaned the encroachment of nanny-state status, but sometimes people need protection from themselves. We believe payday borrowing is one such case.

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