Predatory Lending Project

Tens of thousands of Alabamians are trapped in a cycle of debt because of predatory loans. According to the latest information available from the Alabama State Banking Department, there are 630 licensed payday loan shops open for business in the state today. By comparison, there are approximately 250 McDonald’s restaurants in Alabama. The Banking Department—which has been tracking data on all payday loans granted in Alabama since 2015—reports that the average payday borrower in Alabama takes out eight loans per year. Between October 2016 and September 2017, 214,429 Alabamians took out more than 1.8 million payday loans.

The Consumer Federation of America reports that using payday loans leaves consumers twice as likely to end up in bankruptcy within two years, twice as likely to end up becoming delinquent on credit cards, more likely to have their bank accounts closed involuntarily, and also much more likely to struggle with necessary living expenses.

Beyond the individual costs that borrowers are burdened with, the debt traps created by the payday loan industry suck vast sums of money out of local economies and small businesses. Between October 2016 and October 2017, Alabamians paid more than $107 million dollars to payday lenders in fines and fees. In the preceding year, the amount was $116.4 million. If these two years are representative, then it is likely that Alabama’s local economies—and low-income communities—are losing more than a billion dollars every decade to payday lenders in fees alone. That money isn’t staying in Alabama, either: it is almost exclusively flowing to the out-of-state corporate headquarters of major payday lending franchises.

Alabama Appleseed is committed to protecting borrowers in our state from predatory lending practices. We advance legislation that would curb the predatory practices of payday lenders in Alabama, with the ultimate goal of instituting a 36 percent APR rate cap on all small loans (as is standard in many other states, including in Georgia and North Carolina).