Pay day loan database bill advances in Senate; title loan reform may be dead

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Pay day lenders and Title Pawn lenders line Fairview Avenue.  A Senate committee Tuesday approved legislation that would establish a central database to track pay day loans. (Montgomery Advertiser, Amanda Sowards)

Pay day lenders and Title Pawn lenders line Fairview Avenue. A Senate committee Tuesday approved legislation that would establish a central database to track pay day loans. (Montgomery Advertiser, Amanda Sowards)

After a very bumpy trip through the legislative process, pay day loan regulation may be on its way up. Title loan reform, meanwhile, seems on its way down.

The Senate Banking and Insurance Committee Tuesday approved a bill sponsored by Rep. Patricia Todd, D-Birmingham, that would establish a central database aimed at enforcing a state law capping the amount of debt an individual can have out at $500. The bill, which has the support of Senate President Pro Tem Del Marsh, R-Anniston, was approved by the House last week.

Meanwhile, efforts to achieve title loan reform in this session appear to be dead. Rep. Rod Scott, D-Fairfield, said Tuesday afternoon that supporters of his bill to cap interest rates charged by title loan operators and establish a central database could not come to an agreement over rates and loan terms.

“We’ve been able to restructure the bill so that there is agreement on taking title loan out of pawn, and structuring it as an independent industry area, but we have not been to come into agreement on the interest side,” he said.

Scott’s bill had more than half of the House signed on as co-sponsors, but the majority wasn’t enough to carry the legislation.

“I wish we could have gotten the bill passed this year, but it appears we will not be able to do that,” he said. “We’ll just have to refocus our efforts, and keep the agreements we currently have, and (work on) getting the industry to understand those terms and rates we have are still loan shark rates.”

Todd’s bill initially contained provisions similar to Scott’s, including a 36 percent interest rate cap. The House Financial Services committee appeared to kill the bill in early February, but after negotiations brokered in part by House Speaker Mike Hubbard, R-Auburn, supporters of Todd’s bill and the industry agreed to a reduced bill that would establish a central database to track loans. Senate President Pro Tem Del Marsh, R-Anniston, has said that he would prefer to have the database in place before considering other measures.

The State Banking Department, which attempted to set up its own central database to track pay day loans last fall, would be charged with administering the database. The database would be supported by a 75-cent-per-transaction fee charged to providers.

The bill passed through the committee without a great deal of objection from committee members, but chairman Slade Blackwell, R-Montevallo, put an amendment on the legislation that would require the database to be competitively bid.

Todd noted that state law already requires competitive bids, but Blackwell said “it’s not in the law, per se.”

Todd and Herb Winches, a lobbyist representing Check Depot in Birmingham, said smaller cocmpanies were concerned about Veritec Solutions, a database company based in Jacksonville, Fla. with getting the contract. Veritec has created similar databases in other states, and Winches said smaller firms wanted to be sure they were included in the database before it went online.

“I’m OK with (the database),” he said. “We just want everyone to be on an even playing field.”

Todd said the Banking Department “will not roll out the database until everyone is on it.”

The amendment added by the Banking Department could potentially send the bill to conference committee; however, Todd said she planned to concur in it, should the legislation pass the Senate.

– posted by Brian Lyman

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