At Bond & Botes, P.C., we work with a variety of people who have fallen on financial hard times and, in some cases, need to file for bankruptcy. Of all the financial problems we encounter, few compare to being caught in the trap of payday lending.
We believe that the state of Alabama is not doing enough to protect our citizens from the predatory payday loan industry, and we are working to make our voices heard. We’ve created a petition to demand that our state legislators take concrete action to reform payday loans in our state.
What Is a Payday Loan, and How Does it Work?
Payday lenders typically target low-income consumers, touting “quick cash” with little hassle. In minutes, a consumer can get a loan to hold them over to the next paycheck, but that money comes with interest rates and fees significantly higher than traditional loans.
Most payday loans occur in physical stores, but they also are offered online or by phone. No loan application is required. Instead, the lender records information about the borrower’s bank account and employer, along with contact information.
Borrowers write checks to lenders for the amount to be borrowed plus added fees and finance charges. The lender holds the check until the loan comes due, usually several weeks later, then cashes the borrower’s check or charges the bank account.
Significant difficulties ensue for borrowers who are unable to pay back the full amount — the loan plus interest and fees — at the appointed time. The only option other than paying is to roll over the loan into a new term of several weeks, with an additional fee added.
Convenience, Exorbitant Rates Trap Borrowers
It’s easy to see how desperate, highly vulnerable individuals can become caught in the trap that payday lenders skillfully set. Payday lenders use advertising tactics that tout them as a convenient, fast way to get cash that borrowers may need to cover an unforeseen emergency such as car or furnace repair.
Many consumers who use payday loans live paycheck-to-paycheck and often cannot get loans through traditional sources. In a time of great need, they turn to payday lenders.
Demanding Legislative Action
The Alabama Legislature has had the opportunity in the past to improve the payday loan situation but has failed to act. In 2016, it looked like the Legislature might take action by implementing reasonable payment terms and interest rates for payday loans, but the legislation failed in committee.
Earlier this year, a bill that would have capped interest rates passed in the state Senate but did not make it to a vote in the Alabama House.
Alabama Needs Payday Loan Reform
We believe that payday loan reform would be a significant, positive step for the citizens of Alabama. Our state does not have a good track record on this issue; interest rates for payday loans can be more than 450 percent, among the nation’s highest. By population, we also have a higher concentration of payday lenders than any other area of the United States.
The attorneys at Bond & Botes, P.C., have taken the lead on this issue by creating a petition demanding that our state leaders initiate reform measures. We encourage you to sign our petition to help protect our neighbors from predatory lending and make our state a friendlier environment for working families. If you need assistance with protection from creditors, contact us for a free consultation with an attorney.
Brad Botes is a principal of each of the Bond & Botes Law Offices throughout Alabama, Mississippi, and Tennessee. He holds a Bachelor of Science from the University of North Alabama, and a Juris Doctorate from Cumberland School of Law at Samford University. He and his team of bankruptcy lawyers have spent over 30 years guiding people through financial challenges. Read his full bio here.