Gov. Robert Bentley is creating a centralized payday loan database to help enforce a $500 cap on how much folks can borrow in Alabama from the payday lenders. The decision won quick praise from advocacy groups for the poor, and rightfully so. But a payday loan industry spokesman criticized the move, making the same claims that have been made before. Currently, payday lenders are not supposed to issue loans to customers with more than $500 in existing payday loan debt. But since there has been no centralized database to track the loans, the payday lenders have in all probability ignored that restriction. I suspect it’s more than just a probability. Gov. Bentley had this to say about his plan:
A single database would protect borrowers from excessive debt from multiple payday loans. If someone has several loans at the same time, and they all carry high interest rates, it’s easy for that person to get trapped in debt. This database can help people avoid that.
John Harrison, superintendent of the Alabama banking department, said without a centralized system, neither the state nor the lenders have any way of knowing if folks are borrowing in excess of the $500 cap. John stated that his department “can’t enforce the cap without the database.” I trust John on this issue and if he says we need the database, that’s enough for me – we need it! Alabama Arise, an advocacy group for the poor, is totally in support of the governor’s plan. Kimble Forrester, state coordinator for Alabama Arise, says Governor Bentley is “finally putting teeth in the law.” In defending his plan, Gov. Bentley said the database would actually be a benefit to lenders and would actually help them comply with the law.
A spokesman for the governor said they hoped to have the database operational sometime in January. I believe the state’s authority to regulate banking and lending gives Governor Bentley and the Banking Department the authority they need to create the database. But clearly, the fight about the issue is not over. A lawsuit has already been filed in a Montgomery court in an effort to block the database. Hopefully, that effort by the payday lenders will fail.
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