The new payday loan database of the US state of Alabama reveals that citizens in the state took this short-term loan more than two million times in the last year. Further, it was revealed that Alabamians took an average of eight loans in 2015. Also, the value of an average loan in the state last year was $326, while the average loan term was for 19.6 days. About a one-quarter million individuals have taken these loans in the state.
This data would surely surprise a lot of people, as the popular belief is that, a payday loan is on the wane because of the strict restrictions imposed by the federal government and many states. Google too, recently imposed a ban on all payday loan advertising on both its search and display networks.
Quick Cash Loans Popular in Alabama
However, this data makes it clear that such cash advances remain popular in the state, and in fact, could actually be growing. Alabamians value the services offered and would approach these businesses for their cash needs, often preferring them over banks and other lending agencies.
In fact, payday loan businesses have been saying for a while now that the cash advances they make remain popular in many US states, in spite of the many federal and state restrictions that have been imposed, as a lot of people have an urgent cash requirement that will help them solve a sudden emergency.
Conventional banking and lending systems are not able to help them with the current systems. They are simply not viable alternatives. If there were practical alternatives, then there couldn’t have been so many repeat loan usages in Alabama.
The Alabama State Banking Department Disclosure
A presentation was made to the Alabama Consumer Credit Task Force members by the Alabama State Banking Department recently, where they revealed the state’s payday database. This database was created recently for tracking payday lending in the state. Many other states in the US have created similar databases.
The task force recommends changes to the state’s consumer credit laws, and this includes laws governing payday loans as well.
The revelation disclosed that people in Alabama took payday loans 2.1 million times since the database was started in August 2015. 246,824 borrowers in the state approached lending agencies for money. The figure would surely have been much higher if the group had started creating this database earlier.
Consumer advocates are saying that this shows payday loans remain extremely popular in the state. Critics have said that Alabama must do more for protecting consumer interest. However, others disagree, saying that the present restrictions are adequate. Any further restriction could kill the industry, thereby denying people the money they need in an emergency. It could turn out to be a very serious issue if they don’t have the funds they need. For instance, many more people might have no other option but to file for bankruptcy. That won’t be good for the state’s economy.
The state’s payday industry spokesman pointed out that the number of businesses offering these quick cash loans have already fallen from last year’s 1,100 to 747 now. It will definitely go down further if the state decides to impose more restrictions.
Payday Loans Extremely Popular in the State
Analysts are saying that since people took an average of 8 payday loans in 2015, it shows that they are using the money not just in an emergency, but to pay for recurring expenses as well. You don’t have to disclose why you need the money with payday lending. There is no credit check as well. There is very little paperwork. So the cash advance can be issued quickly, often within two to three business days.
This also shows that Alabamians are paying back the loan quickly as well because they wouldn’t have a second loan if the money was still due. Critics have been saying that payday loans cause debt traps. But, the Alabama data proves that there is no such thing in the state. And so, there is no case for imposing further restrictions.
Most Alabamians seem to be comfortable with the flat fees and interest rates charged. The two-week loan duration is comfortable too, as there is no long-term debt burden.
Why Are Alabamians Taking So Many Payday Loans?
A member of the task force, Max Wood, feels that there is no other way people in the state can get loans as little as $300 so quickly. “It’s almost like walking into the room and walking away with the money. So simple”, he says.
After a court ruling last year, Alabama imposed a $500 cap on a one-time payday loan. The average value of the loan dropped to $326, and the number of lenders dropped too. The database project was started after this.
Many in the state are scared of approaching the banks because if they cannot repay and the check bounces, then the overdraft fees are higher than what payday lenders charge.
The fact that so many Alabamians are seeking a quick loan doesn’t necessarily mean that the state’s economy is in poor shape. According to the results of a recent survey, 47 percent people in the US will have problems coming up with just $400 in a sudden emergency.
Lenders in Alabama Want to Protect Consumer Interest
Lending agencies in the state are obviously happy that so many people are asking for quick cash loans. But a spokesman for the industry said that it’s not just about the loans. “We want to make them consumer-friendly too”. Lending businesses are looking at consumer interests in the state.
“We’ve got to make sure consumers are protected. I want our companies to make a reasonable profit. They have to. They can’t stay in business if they don’t, but we have to protect the consumers as well”, the spokesperson added. The industry as a whole suffers if people go into a debt trap and are unable to repay the loan amount.
The Alabama House Committee met a few months back and passed legislation to lower the fees on payday loans. The term of the loan was also increased from 10 days to between 28 and 45 days. Perhaps these are also some of the reasons that spurred the growth of the industry.
The state’s payday loan industry is OK with all these regulations. Almost all the businesses are ethical and they want to follow all government laws. The 747 licensed payday lending companies are offering good value and a high level of service to people in the state. Tighter restrictions won’t be good for anyone.