MONTGOMERY, Ala. — The House Financial Services Committee on Wednesday sent a payday-loan regulation bill to a subcommittee, a move that the bill's sponsor called an effort to kill the legislation.
The bill would cap the annual interest rate at 36 percent on the short-term loans. It also would establish a state database to enforce existing limits on how many loans people can have out at one time.
The committee voted to send the bill to subcommittee after a public hearing. The committee action was the first skirmish this session in the long-running battle between groups who say the businesses take advantage of the poor and lenders who say they provide a service.
"I'm very disappointed because of the thousands of people who will be driven into poverty while we fiddle around on this," bill sponsor, Rep. Patricia Todd, D-Birmingham, said after the vote.
Shay Farley, the legal director of Alabama Appleseed, an advocacy group for low-income people, told committee members that the interest rates charged by the lenders are immoral.
However, Jay McDuffie, CEO of Alabama Cash Services, said customers choose those loans over others types of financial transactions. The charges are less than the fees for overdrawing a checking account or missing a payment on a credit card, he said.
Committee chairman Lesley Vance, R-Phenix City, said Todd's bill could possibly come out of committee this session, but also might not.
"You've got to address the cause of what's causing people to run down there," Vance said of people's use of the lenders.
The committee also carried over a second bill related to the automobile-title loan industry.
Alabama campaign finance records show that the lenders and a related political action committee had contributed to six of the nine committee members. The cumulative contributions ranged from $1,000 to $3,900 per lawmaker.
Rep. Jack Williams, R-Vestavia Hills, said the $500 he received wasn't a factor, noting that his campaign had received more than $100,000 in total contributions. Williams said he had been bombarded with information from both sides and wanted time to learn more.
Campaign records show Vance received $1,000 from Alabama Lenders PAC, $1,500 from Title Max, $500 from Cash America and $400 from Check Into Cash. Vance said he didn't remember receiving any industry-related contributions and would have to check his records.
Todd said she thought the contributions were a factor in the bill's demise.
"It's disgusting. I don't know what else to say," Todd said.