The promising news is that the Alabama State Banking Department has taken a step closer to creating that worthwhile database. Last May, the department proposed the creation of such a record after the state Legislature failed to pass reforms of the payday and title-loan industries.
The public-comment period on the department’s proposal ended this summer. State Banking Superintendent John Harrison is awaiting a recommendation from the department’s staff.
Our hope is that the Harrison will decide in favor of the database. Without it, the safeguards against Alabamians digging themselves huge financial holes through payday loans are weak, at best.
The Star’s editorial board has long been deeply concerned with the impact payday lenders have on Alabamians. At their worst and in the most extreme cases, APRs of short-term payday loans can rise as high as 456 percent — a dictionary-perfect example of usury. The multiple databases that exist in Alabama aren’t an ample shield against either lenders or customers who may bend or abuse state laws on payday lending.
Granted, payday lending fills a banking void for those who often live check-to-check and find small loans for monthly or unexpected expenses hard to get from traditional banks. Calls for those institutions to create lending programs for customers with these types of needs are fair.
Yet, it’s laughable that payday-lending industry leaders called for their customers to be “self-policing,” as one payday advocate told the Montgomery Advertiser this week. Strong regulations in banking exist for the benefit of the lenders and customers. With them, both benefit. With weak or non-existent regulations, abuses or loopholes inevitably occur.
Even with a single database in place, payday lenders prey on the vulnerability of people at their time of need. But creating that online list will put one more safeguard in place — a safeguard that’s sorely needed.