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According to
an article in Monday’s Birmingham News, the Birmingham City
Council will today discuss a moratorium against short term
lenders (payday and title lenders) without any insight from
state regulators, lenders themselves or customers of such
businesses. Before Birmingham’s City Council considers
limiting free enterprise in the state’s largest metropolitan
area, they should take the time to study the facts.
The
councilwoman championing this moratorium claims that short
term loans are “nearly impossible to pay off.” The fact is,
Alabama law does not allow payday loans in excess of $500,
and, more importantly, customers by law must pay off the
loan at the end of the initial 14 to 30 day loan period.
Unlike more traditional consumer debt such as a credit card,
Alabama law does not allow a customer to pay only the
interest on such a loan: they must repay the loan in full.
The same
champion of this proposed moratorium claims that these loans
“strangle residents financially.” She must not be aware of
multiple studies from the FDIC that show that states that
have shut down the payday loan industry have experienced
increased consumer bankruptcy rates and a huge rise in bank
overdraft fees. A recent University of Chicago study also
found that access to short term loans decreases the
incidence of foreclosures and helps reduce theft.
The bottom
line is that working Alabamians need access to short term
credit for urgent, temporary financial needs. Short term
credit helps families avoid bankruptcy and foreclosure, even
reduces crime rates. If the research isn’t enough, hear from
customers across the state who deeply appreciate the
usefulness of these loans at
www.borrowsmartalabama.com. The Birmingham City Council
owes it to the customers who use and appreciate these loans
to understand the facts before limiting business competition
in the city.
Birmingham City Council's plan to introduce a moratorium against
our industry tomorrow, we have sent the release below directly
to all council members and to the Birmingham News. The
Birmingham News has indicated they will publish this response
tomorrow.