Rep. Patricia Todd, D-Birmingham, awaits her turn to speak during a rally concerning predatory lending legislation [auth] Tuesday, Feb. 4, 2014, in Montgomery, Ala. Todd and Rep. Rod Scott, D-Fairfield, are again trying to cap the interest rates on payday and title loans, but they admit it will be hard to enact in an election year. (AP PHOTO/AL.com, Julie Bennett)
MONTGOMERY, Ala. (AP) — Two Birmingham-area legislators are again trying to cap the interest rates on payday and title loans, but they say it will be hard to enact in an election year.
Democratic Reps. Rod Scott of Fairfield and Patricia Todd of Birmingham outlined their bills Tuesday at a rally of about 50 people on the Statehouse steps. Their bills would limit the interest rates on title and payday loans at 36 percent. The rates on payday loans can reach 456 percent annually, although the loans are designed to be paid off much quicker.
Similar bills died in the Legislature last year.
The two sponsors said the bills will be hard to pass because the Republican leadership doesn’t want to take up contentious bills in an election year, because some legislators are involved in the payday and title loan business, and because payday and title law companies employ lots of lobbyists.
“We should call it the full lobbyist employment bill,” Todd said.
Payday and title loan businesses have successfully fought stricter regulation for several years. Their industry groups, the Council for Fair Lending and Borrow Smart, says they provide a service to people that banks don’t want to serve and that their charges are less than the fees for overdrawing a checking account or missing a payment on a credit card.
Max Wood, president of Borrow Smart, said the legislation would shut down the businesses because $3 a month per loan would not cover the utility bills.
Tuesday’s rally was organized by the Alliance for Responsible Lending, which includes leaders of Alabama Appleseed, the Alabama Federation of Republican Women, AARP of Alabama, the state NAACP, and the Women’s Fund of Greater Birmingham.
Pamela Tarver of Montgomery told the group that she took out a $700 title loan on her car four years ago to pay her rent. Then the title loan company offered her more credit, and she increased the loan to $3,800. She said she has paid $14,000 in interest and fees and still owes money because all she can afford to pay is the interest.
“They keep offering you more money knowing you can’t pay it back,” she said.