- Associated Press - Wednesday, April 27, 2016

MONTGOMERY, Ala. (AP) - A House committee on Wednesday shelved a bill that would have given borrowers up to six months to repay payday loans, but agreed to send a watered-down version to the House for a full vote.

The House Financial Services Committee voted out a bill that gives people up to 45 days to repay the loan. Lawmakers said it would levy an effective annual interest rate of about 180 percent. Currently, interest rates on pay day loans can top 400 percent.

Committee Chairman Ken Johnson said he didn’t think people needed six months to repay the average payday loans of $319.

“If the average loan is $300, why have people drag paying that loan back out over a six-month period. I think the average person is using these responsibly or there wouldn’t be that much use,” Johnson said.

Reform advocates, who have pushed for new restrictions on the payday loan industry, won a victory when the Alabama Senate approved the bill allowing six-month repayment window and installment payments.

Stephen Stetson, a policy analyst with Alabama Arise, said the six-month payment option was a “proven solution.” A Pew Charitable Trusts study found that the number of Colorado payday stores shrank by half after that state passed a six-month repayment law.

“That’s still really quick to repay a loan when most of the paycheck is already earmarked for other bills. So we would have liked to see six months,” Stetson said of the 45-day window.

The House of Representatives is scheduled to vote on the bill Thursday.

Stetson said he was concerned the bills could perish with just three days left in the legislative session. He said he was also concerned it could end up in an “unpredictable” conference committee.


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