We are now halfway through the 2014 legislative session and HB406, an incredibly important piece of legislation that will protect some of the state’s most vulnerable citizens and grow Alabama’s economy, is still patiently waiting its turn.
But, Alabama can’t wait much longer.
This legislation, which would put in place a handful of common sense reforms to the predatory car title lending industry, is too important to wait another year. It has widespread support across party, religious and ideological lines. A recent poll found that over 60% of Alabamians supported a rate cap to lower car title lenders 300% interest rates. More than half of the Alabama House of Representatives have joined me in sponsoring this bill.
HB406 enjoys this extensive support because these common sense reforms help protect our citizens and state. Every day this industry continues unregulated, more citizens are victimized and end up buried in insurmountable debt. Each day that passes without the necessary reforms in HB406, more communities suffer from the stifling impact these lenders have on their local economies.
In the absence of legislation, eighteen municipalities, including several of the state’s largest cities, have stepped in to try to curb the damage being done to their citizens and local economies by passing local ordinances and moratoriums. Many of their resolutions have also publicly called on the legislature to step up and provide reform at the state level.
From one end of the state to the other, local lawmakers have watched the economic potential of whole neighborhoods flat line as a result of this unregulated industry. As one Montgomery Councilman put it when discussing how these lenders are a barrier to economic growth in his own neighborhood, “…No one in their right mind would drive down there and think that it’s an economically flourishing area.”
And, he’s right. Without basic regulations, this industry is trapping thousands of Alabamians in a nearly inescapable cycle of debt and blocking economic progress across the state. Car title lenders and their immoral 300% interest rates are taking money out of the pockets of working Alabamians and from our local economies. Alabama has more title lenders, per capita, than any other state in the nation. Their clustered storefronts increase blight and scare away investment from legitimate businesses.
This bill will address these issues through capping the current 300 percent interest rate regularly charged for car title loans. Instead, it would put in place a more reasonable interest rate, at the most of 36 percent APR, which ought to be plenty of profit on a loan that is already secured by a tangible thing of value – the family car. It will extend terms to that folks don’t end up stuck in one month loans they can’t pay, instead extending the terms of these loans to give folks an honest chance at repaying what they owe and keeping the car they need to get to work.
Under the current law, if a car title lender repossesses a vehicle, they can turn around and sell it for more than the value of the loan – and keep the difference. This sometimes amounts to thousands of dollars more than the initial loan, not even counting the many interest payments made before they seize someone’s car. Alabama has always appreciated the value of hard work, but we don’t appreciate taking advantage of someone who needs money in a desperate time. This bill will return that surplus money to the borrower.
Enough is enough. These measures are common sense reforms that we must move forward. The time is now.
I’m counting on Representative Vance, his leadership and my colleagues on the House Financial Services Committee to stand up and do the right thing and send this legislation to the full legislature.