Alabamians are hard working, honest and proud. We show up early and stay late. We take pride in the things we build and the services we provide. We care deeply about earning a decent wage to support our families. We value small business as much as big industry, and we have an entrepreneurial spirit.
It is largely because of these qualities that I am surprised by the recent dialogue in the media and in the statehouse about short-term lending, specifically payday and title lending. The sentiment of this dialogue has been about protecting consumers. Consumer protections are certainly necessary in all types of businesses to protect people from unfair, unlawful or unethical practices. There are many regulatory agencies both at the local and federal level that do just this. In fact, one new large federal agency, the Consumer Financial Protection Bureau, made one of its first field hearings right here in our state this year. However, it would seem that those suggesting new restrictions are instead attempting to protect consumers from themselves.
In a recent editorial published in two major state newspapers, the author said there was a need to protect “the great number of poor and uneducated residents of Alabama.” Last I checked, we are not a state made up of poor, uneducated people. And Alabamians do not need or deserve to have our life decisions regulated by government.
I know of no examples of individuals who were successful because they were restrained by government from making “wrong” choices. However, our state’s history is full of ordinary people achieving great things purely through hard work and creative innovation.
Yes, short-term loans are expensive. For a 30-day payday loans, the borrower pays a fee of up to 17.5 percent. That may seem steep to some, but compared to a credit card late fee, a bank overdraft or a utility service fee, a payday loan is often the cheaper alternative. In fact, many banks in our state have started offering similar cash advances to meet the demand for an alternative to overdraft fees.
In America, and certainly in Alabama, the choice should be yours as to what services you decide to use. The role of government when it comes to financial services should be to ensure that you are thoroughly informed and fairly treated. Alabama’s existing short-term lending laws provide for those protections. And, oversight by our local and national regulators are there to enforce those protections.
Meanwhile, Alabamians have plenty of options for short-term loans online that are not regulated or audited and for which the fee restrictions don’t apply. The state of Ohio has recently implemented severe restrictions to store-front short-term lenders, and many have now closed. The Pew Research Center reports that more than 10 percent of the Ohio population is now using unregulated Internet lenders.
It would seem that if we trust the hardworking people of Alabama, and if we indeed want to protect them from unfair practices, we should simply ensure regulated access to capital, including short-term loans.
We will never realize our full potential as a state without unwavering confidence in the people who live and work here. In the ongoing dialogue about short-term lending in Alabama, I hope those who attack the industry will stop demeaning the borrowers in the process.
Charles Hunter is the spokesperson for Borrow Smart Alabama, a membership organization consisting of more than 400 short term lending stores in Alabama that was established in 2007.