Today, President Obama is visiting Alabama to talk about protecting families from financial abuses, just after the Consumer Financial Protection Bureau announces new payday lending rules. Payday lending storefronts make unsecured small-dollar loans that represent an advance on a borrower’s next pay check and generally have a term of two or four weeks. Across the nation, fees for payday loans average between $10 and $20 for each $100 borrowed. The typical $15 fee per $100 for a 14-day storefront payday loan is comparable to a loan with an annual percentage rate (APR) of 391 percent. In August 2014, the Joint Center for Political and Economic Studies released a report examining campaign contributions from the payday lending industry to Alabama state legislators. Here’s the summary:
- In 2014, Alabama had 1,032 licensed payday lending storefronts.
- The number of payday loan establishments range from nine to 48 per Alabama state Senate district, and 0 to 26 per state House district.
- Sixty-six percent of the Alabama state senators and 29 percent of the House members elected in 2010 reported campaign contributions from this industry. These contributions range from $500 to $8,100, and 0.08 percent to 5.43 percent of campaign contributions from all sources.
- Legislators who represent districts with the largest number of payday stores sometimes, but not always, report contributions from this industry, but in some instances are no more likely (or less likely) than members representing other districts to report such contributions.
- Contributions are more likely to be made by the payday lending/title loan industry to legislators who are members of committees with jurisdiction over the payday lending/title loan industry (i.e., the Banking and Insurance Committee in the Senate, and the Financial Services Committee in the House) or who hold leadership positions within the state Senate and House.
- In the 2010 cycle, 11 of the 26 African-American House members reported contributions from the payday lending / title loan industry, and six of the seven African-American Senate members reported contributions from the industry (Senator Hank Sanders, a member of the Banking and Insurance Committee, reported no contributions from the industry).