State officials say they're closer to deciding whether to create a database to track payday lending in Alabama.
Alabama bureau of loans supervisor Scott Corscadden told the Montgomery Advertiser ( http://on.mgmadv.com/18YpG3m) that a public comment period on the proposal to create the database closed this week with 250 people weighing in.
Officials will review the comments and make a recommendation to state banking Superintendent John Harrison, who will make a final decision, Corscadden said, adding that the review should be done by early September.
Alabama law bars consumers from having more than $500 in payday loans. However, lenders currently use between five to seven databases to track loan distribution.
A bill aimed at setting a 36 percent annual interest rate on payday loans failed in the last legislative session. The bills aimed at putting new restrictions on payday lending in the state stalled in a House committee after industry leaders said the legislation would drive them out of business.
Critics of payday lending have said some customers who take out short-term loans are slapped with interest rates that can balloon to 456 percent. Some consumers end up having to take out additional loans to cover the first one they're struggling to pay off. The consolidated database would help prevent that practice, officials have said.
Gov. Robert Bentley has shown support toward the department's initiative, his spokeswoman Jennifer Ardis told the newspaper.
Those with ties to the payday lending industry say the database won't work, and customers should monitor their own lending habits.
"It's going to force the consumer to use higher-cost online lenders," said Buck Wilson, president of the Modern Financial Services Association of Alabama. "Those do exist in the state."
Wilson said he thinks the database could put online lenders at an advantage over storefront lenders.
Even if the database is created, Corscadden said opponents could sue to block it by using a statute granting critics of the proposal a judicial review process.
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Information from: Montgomery Advertiser, http://www.montgomeryadvertiser.com
