Alabama Payday Loan Law and Legislation
Payday loans in Alabama are not at the present moment under the regulation of the Small Loan Act. Such conditions were very favorable for many old companies to expand and grow, as well as for newer companies to get started. At the present moment, payday lending is absolutely legal in Alabama.
New regulations with regards to payday loans in Alabama have come up within the past six months. The issue they are responding to currently is the high correlation to consumers taking out these loans and getting further into debt. These loans are great to use, but only in some instances. Most people use these loan services out of desperation, or just poor financial planning. However used properly they can actually be a benefit.
This will also have a severe impact on their credit as well. Those who already have poor credit have nothing more to lose, so they’re more likely to default on the loan as well, which encourages bad behavior. The first step for them would be to pair up with a credit repair company.
New Regulations Passed
Back in April, lawmakers from both parties and advocacy groups spoke in support of a bill to give payday loan customers more time to pay off loans, a change they said would help protect financially fragile borrowers from spirals of debt.
Alabama Payday Loan Regulations
|Interest Rate (APR)||456%|
|Maximum Loan Amount||$500|
|Minimum Loan Term||10 days|
|Maximum Loan Term||31 days|
Alabama law allows payday lenders to charge a fee of up to $17.50 per $100 borrowed on loans with terms as short as 10 days. If calculated as an annual percentage rate, that equates to 456 percent.
The bill would set the minimum term at 30 days, effectively reducing the maximum APR by more than half. Advocates for the bill said the longer term would help consumers pay off their loans instead of rolling them over and incurring more fees. They said consumers are accustomed to paying their obligations, like car payments and rent, on a monthly basis.
The bill is set to pass in late 2020 with the hopes of helping consumers get out of debt, rather then get further into debt.
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