A bill that passed the Alabama Senate yesterday would give payday loan customers longer to repay their loans.
The bill, sponsored by Senator Arthur Orr, would give borrowers 30 days to repay a loan, instead of as little as 10 days in some cases. Orr says that change would give people a much better chance at paying off the loan. He says the change drops the effective yearly interest rate of payday loans from 450 percent APR down to 220 percent.
With payday loans, borrowers currently pay a flat fee of up to $17.50 per $100 to borrow money for a period of 10 to 14 days. Critics argue the loans can quickly become a predatory lending trap when people borrow more money in order to pay off the first loan. Industry backers, though, say the loans provide a service to people who have few alternatives.
The bill now moves to the House of Representatives, which Orr says has been a “Bermuda Triangle” for past payday loan reform efforts. In 2016, a similar bill passed the Senate but failed to clear the House.