- Associated Press - Wednesday, March 5, 2014

MONTGOMERY, Ala. (AP) - After years of killing bills to tighten regulations on payday loans, the Legislature may agree to set up a database to make sure people don’t take out more than $500 in loans at one time.

The House Financial Services Committee voted unanimously Wednesday to approve a bill that would set up the statewide database of payday loans in the Alabama Banking Department. Businesses would have to enter information in the database each time they got ready to issue a loan. If someone already had $500 in loans, the business could not issue one exceeding that.

The bill’s sponsor, Democratic Rep. Patricia Todd of Birmingham, said Alabama has had a $500 limit, but there was no way to enforce it without a central database. She said people would go to multiple lenders and take out more than $500 in loans, trapping them in a cycle of high-interest debt.

“This will at least keep people from having multiple $500 loans,” she said.

Todd’s bill now goes to the House. She said she is optimistic about its chances because she worked out a compromise with the industry and had bipartisan support in developing the compromise.

Payday loans are short-term loans, usually for 14 to 30 days with annual interest rates that can hit 456 percent. Payday lenders say they serve a market that banks don’t want to serve, and the costs are cheaper than bouncing a check.

Todd and others have tried for several years to pass bills lowering the interest rates with no success. The bill she introduced at the start of the legislative session stalled in the Financial Services Committee, where six of the nine members had received campaign contributions from the industry or an associated political action committee. The amount ranged from $1,000 to $3,900.

Once Todd dropped the interest rate cap and focused on the database, her bill breezed through Wednesday with bipartisan support.

Gov. Robert Bentley’s Banking Department tried to use its regulatory authority to set up a database last year. The industry sued and got the database put on hold pending a trial in June. Todd’s bill would negate the lawsuit and get a database operating by early 2015.

Herb Winches, lobbyist for the 13 Check Depot stores in the Birmingham area, said the family-owned business wants to make sure small lenders have the same access as big lenders. If that is done, he said Check Depot is fine with the legislation.

“It’s going to become law, so you don’t have any choice,” he said.

Anna Pritchett, advocacy director for AARP Alabama, said the bill doesn’t do as much as the organization for older citizens wanted, but “any forward motion is good.”

Todd said she would like to give the database two years to work and then come back with additional regulatory legislation.

Todd’s bill does not affect title loans on vehicles.

A separate bill by Republican Sen. Arthur Orr of Decatur won approval by the Senate Banking and Insurance Committee on Wednesday. Orr’s bill includes a statewide database like Todd’s bill, but it also extends the length of the loans to four months, which reduces the annualized interest rates. The payday loan industry is opposed to extending the length of the loans.

Orr’s bill now goes to the Senate.

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