MONTGOMERY, Ala. — Alabamians took out more than two million payday loans in the last year with borrowers taking an average of eight loans each, according to numbers from the state’s new payday loan database.
The state Banking Department on Wednesday presented information captured by a state payday database to members of the Alabama Consumer Protection Task Force, a group designated with recommending changes to Alabama’s consumer credit laws, including the laws that govern the payday loan industry.
The numbers indicated that almost 2.1 million loans were taken out since the database was initiated in August of 2015. There were 246,824 unique borrowers that went to payday lenders for money, according to the database.
Consumer advocates and lenders agreed that the numbers show the popularity of payday loans. However, advocates and lenders have steadfastly disagreed over the years over whether there should be tighter restrictions on the industry.
Critics of payday lending said the state needs to take additional action to protect borrowers from what they call a debt trap, while a payday lender said the database numbers show an industry already in decline from increased state regulation.
Stephen Stetson, a policy analyst at Alabama Arise, said the repeat usage suggests that people are using the loans to pay recurring expenses and not just for emergencies.
“These loans are marketed for emergency use only. If somebody is taking out that many in a year, it means they are using them to pay the bills,” Stetson said.
With payday loans, people pay a flat fee to borrow money for up to two weeks.
The average loan in Alabama was for $326, and people paid an average fee of $56.
Max Wood, owner of Cash Spot stores in Birmingham and Tuscaloosa, said the database numbers are consistent with what the industry has observed.
Wood, who is not on the task force, said lenders provide a needed service for people who have nowhere else to turn and would face higher overdraft fees if they bounced a check.
“There is no other place they can walk in the door and get $300,” Wood said.
The Alabama Banking Department began tracking the loans in August of 2015 after winning a court fight over the creation of the database to enforce an existing law that limits people to having no more than $500 in payday loans at one time. The numbers provided a neutral glimpse of how much Alabamians borrow from payday lenders in the state.
The database showed that about 400,000 loans were declined, but it was unclear if that was because they were over the $500 limit or for another reason.
Wood said the number of loans and lenders is in decline in Alabama since the database started.
The Banking Department indicated that there are 747 licensed payday lenders in Alabama. Wood said that is down from 1,100 a year ago.
Gov. Robert Bentley addressed the group’s first meeting Wednesday and urged them to find common ground.
“We’ve got to make sure consumers are protected. I want our companies to make a reasonable profit. They have to. They can’t stay in business if they don’t, but we have to protect,” Bentley said.