Payday loan customers in Alabama would pay less under a bill that won approval Wednesday from the Alabama House Financial Services Committee.
Rep. Danny Garrett, R-Trussville, is optimistic that his proposed bill will pass the House and Senate and become law. The committee amended the proposed bill to reduce the amount it would save customers before voting in favor of it.
Under current law, lenders can charge fees of $17.50 per $100 borrowed for loans that must be repaid in as little as two weeks, which equates to an annual percentage rate of 455%. Garrett's bill lowers the maximum fee to $15 per $100 and would make the minimum term 30 days, effectively reducing the annual percentage rate to 180%.
Before Wednesday's meeting, Garrett's bill would have dropped the allowed fee to $12.50 per $100, an annual percentage rate of 150%.
A database operated by the Alabama Banking Department, which some payday lenders tried to block, showed last year that lenders issued 462,000 payday loans in Alabama over a 10-week period.
New numbers provided this week by the Banking Department showed that 208,105 unique borrowers have taken out 1.3 million payday loans since the database was established Aug. 10, about 43,000 loans a week.
State Banking Superintendent John Harrison told the committee he supported Garrett's bill.
"What we want to do is protect the customers of this state ... and also we've got some great licensees that absolutely do a good job and we want to protect them," he said. "When you don't have anybody happy, then you're getting pretty close to getting something that is workable and that will absolutely protect those consumers, and that's what we want to do."