Barron touts reform of payday loan industry
September 14, 2006 - Huntsville, Alabama
Alabama State Senator Lowell Barron (D-Fyffe), a former owner or co-owner of at least 20 payday loan businesses across the state, says he will introduce legislation designed to protect consumers and regulate the companies during the next legislative session.
Barron has come under fire from some of the state's larger newspapers recently for his stance on payday loan companies in the past.
In an opinion piece dated Sept. 7, The Birmingham News said the legislature tried to fix the problem as recently as 2003, "but Senate President Pro Tem Lowell Barron, who owned payday lending businesses, sabotaged things with a substitute bill more favorable to payday lenders."
"There is a need for that industry," Barron said of payday loan and title pawn businesses, "but there are some problems with it."
In an interview with The Daily Sentinel Tuesday Barron, who is being challenged for his District 8 Senate seat by Fort Payne Republican Don Stout, claimed, "this isn't about election year politics. I didn't feel good about the direction the industry was going."
Barron has also met this week with editorial boards at The Birmingham News, The Huntsville Times and other North Alabama daily newspapers concerning his package of bills to address the payday loan problem.
Barron sold his payday loan companies, including one in Scottsboro and at least four in neighboring DeKalb County in February. He is the owner of a finance company in Rainsville and was one of the founders of the Bank of Fyffe.
Alabama's laws governing payday loans allows fees of up to 17.5 percent of the loan, which can lead to interest rates in excess of 400 percent a year on a two-week loan. Barron helped pass that legislation and the Alabama Pawn Shop Act, which allows interest rates of 25 percent a month.
"Consumers are not being treated fairly," Barron said. The law has "got to be adjusted. It needs some tuning up."
Stout said he agrees that payday loan companies should be regulated. He told The Daily Sentinel's sister paper The Times-Journal of Fort Payne, "I would be tickled to regulate those folks. They are picking on the poor people around here."
"I think it's certainly campaign based," Stout said in an interview with The Daily Sentinel Wednesday. "With the news out of The Birmingham News who wouldn't think that?"
Payday loans are designed to be short term fixes for those in emergency situations who are unable to get a conventional loan for various reasons, including credit unworthiness or lack of collateral. Payday loans are not considered a good long-term option for the consumer.
A St. Clair County judge recently ruled the state's Pawn Shop Act violates equal protection rights. Judge Charles Robinson, Sr. also ruled part of the law unconstitutional in the case of James Waites who took out an emergency loan of $400 at 25 percent interest a month to buy medicine for his wife.
Waites paid $900, all in interest. When he quit paying Express Enterprise, Inc., his truck was repossessed.
Barron's proposal attempts to correct some of the problems Waites faced. He says he was working on the legislation before the St. Clair County ruling, which has been appealed by Express., and that his legislation would address the basic concerns of consumers.
According to a press release issued by Barron's office his bills "will prevent the piling up of interest, protect private property and establish penalties for those who prey on military families."
"The low end consumer gets hit the hardest. Somebody needs to care," he said. "The act needs to be improved, and that's what I'm trying to do."
"How much money has he (Barron) made off these companies," Stout asked. "If he sees people are being victimized I think he ought to give them their money back."
Barron's reform package designed to regulate the over 2,000 payday loan and title lenders in the state is in three parts: a rollover interest protection act, which prohibits lending companies from extending loans and providing a second payday loan to any customer who has received a payday loan in Alabama in the past 60 days; protecting property from payday loans act, which prohibits a loan company from taking any direct or indirect interest in personal property as a result of a payday loan; and the armed forces financial protection act which prohibits payday loan and title lenders from operating within five miles of a military installation, garnishing military salary or wages and from collecting a loan while a military member is deployed in a combat zone.
Payday loan companies should be able to charge higher interest rates, according to Barron. He cites statistics which show the banking industry loses two percent of the loans made, finance companies approximately 10 percent and payday loan off businesses about 30 percent.
Barron believes his bill will help make the industry responsible.
"I'm skeptical of any bill of this nature that comes out of the Senate," Stout said. "I don't think anything will come out of it except window dressing."
The Daily Sentinel, Ken Bonner, Staff Writer
Related Stories - Campaigns, Campaigning, and Lobbying
- 'Dan Rather Reports' criticizes payday loan industry [November 23, 2006]
- Payday loan limits are long past due [November 22, 2006]
- Retired colonel slams Barron, loan business [October 11, 2006]
- Payday lending cultivates legislative support for comeback [September 28, 2006]
- Davis now supports loan caps [September 26, 2006]
- Congressman Davis touts his payday loan proposal [September 20, 2006]
- Loan disagreement [September 14, 2006]
- Barron touts reform of payday loan industry [September 14, 2006]
- John Edwards: stop predatory lenders [July 7, 2006]
- Payday loan company makes travel donations to group chaired by Richardson [April 1, 2006]
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