Decatur City Council To Push Interest Caps For Payday Lenders
DECATUR, Ala.(WHNT)-A proposal to create interest rate caps is pitting payday lenders in Decatur against city council members.
Council members are scheduled to vote Tuesday on a proposal that calls for a ceiling of 36 percent on lenders. The non-binding resolution has no legal authority since only the state of Alabama has the power to regulate rates, but it does call for state lawmakers to take action. Proponents of the measure call current rates that sometime reach 400 percent or more an attack on low-income families who are caught in a cycle of constant borrowing.
“The entire purpose of this is to make them [borrowing rates] transparent and fair,” said Decatur City Councilman Chuck Ard. “They can charge people interest rates that range anywhere from 200 to 400 percent for loans, and the fact they are not forthcoming when they make these loans…36 percent is a lot of money. If you go invest money today and you would get 36 percent, most of us would do that. So I think it’s very fair.”
But payday lenders say the proposed cap would put them out of business. Some also say it’s unfair since lenders shoulder all of the risk in an industry where many loans are never repaid.
“It’s just going to put all the payday people basically out of business,” said Bob Lewis, the owner of Cash Exchange on 6th Avenue. “Somebody has got to service that market, like it or not. It’s a high-risk business, and it demands a high rate of return…Those people have got to get their money somewhere, where are they going to get it? They’ve got to feed their children, they’ve got to heat their house, they’ve got to live.”
It’s not yet clear if state lawmakers will actually take up legislation dealing with payday lenders.