The new proposed federal payday lending rules are a good start, but they need to be even stronger
Consumer protection took a big step forward in June 2016, when the Consumer Financial Protection Bureau (CFPB) proposed important new federal rules governing high-cost consumer lending products, including payday and auto title loans. The proposals came after years of public comments and input gathered at CFPB events across the nation. (Click here to learn more about the proposed rules.)
Alabamians played a key role in the development of these new regulations. The CFPB held its very first field hearing on payday lending in Birmingham in 2012, and President Barack Obama met with Arise and other state advocates in Birmingham in March 2015 before delivering a speech calling for consumer-friendly reforms of payday and title lending.
These loans come at a high cost in Alabama, where they can carry interest rates of 456 percent a year (payday loans) and 300 percent a year (title loans). The CFPB has broad power to regulate these loans, but importantly, it does not have the authority to reduce rates. Only states can do that.
Arise will continue to work for state-level payday and title lending reform alongside its partners in the Alliance for Responsible Lending in Alabama (ARLA). In the meantime, these new federal rules represent a critical opportunity to improve the landscape of short-term lending in Alabama. Read policy analyst Stephen Stetson's fact sheet to learn what the new rules would do, why they need improvement, and how you can help strengthen them.
SB 285: Adding red tape that would deny food and cash assistance to thousands of low-income Alabamians
SB 285 is a solution in search of a problem. The bill would add huge amounts of red tape that would deny food assistance and cash welfare to thousands of low-income Alabamians – many of them seniors or people with disabilities – who are doing nothing wrong. SB 285 also could cost Alabama tens of millions of dollars to implement during a difficult budget year, and it would not save the state money.
SB 285 would reduce Alabama’s flexibility in the administration of SNAP and TANF, make it more difficult for otherwise eligible households to apply for and receive assistance, and impose expensive and unnecessary verification and data collection procedures on the Department of Human Resources (DHR) and Medicaid. Policy analyst Carol Gundlach’s analysis of SB 285 details 13 things to know about how and why the bill would hurt low-income Alabamians and cost the state money.
A menu of options to improve voting rights in Alabama
Alabama is famous around the world for our historic fights over equal access to the polls. Our entire democratic system depends on how elections are structured and who can participate. When barriers exclude people from voting, they often lose faith in a system that doesn’t seem to value their voice in our society’s decision-making process. (Click here for a PDF version of this overview.)
What proposals are in play?
Civil rights anniversaries and national media attention have placed increasing focus on voting rights issues in Alabama. Several legislative proposals have been advanced to expand access to voting and strengthen our state’s electoral system.
Several bills seek to restore voting rights to people who lost them. HB 268, sponsored by Rep. Mike Jones, R-Andalusia, and SB 231, sponsored by Sen. Cam Ward, R-Alabaster, would clarify which crimes are considered “crimes of moral turpitude” that permanently disqualify people from voting – and which ones aren’t. Other bills that seek to streamline voting rights restoration include HB 222, sponsored by Rep. Chris England, D-Tuscaloosa; HB 245, sponsored by Rep. Thad McClammy, D-Montgomery; SB 186, sponsored by Sen. Linda Coleman-Madison, D-Birmingham; and SB 293, sponsored by Sen. Hank Sanders, D-Selma.
Several bills would ease voter registration. SB 156, sponsored by Sanders, would allow people to register on Election Day. Four other bills – HB 72, sponsored by Rep. Darrio Melton, D-Selma; HB 149, sponsored by Rep. Laura Hall, D-Huntsville; HB 259, sponsored by Rep. Mary Moore, D-Birmingham; and SB 71, sponsored by Coleman-Madison – would register people automatically when they apply for or renew a driver’s license or non-driver ID card.
Other bills would allow more voting time or seek to prevent mistakes. HB 163, sponsored by Rep. Richard Lindsey, D-Centre, and SB 302, sponsored by Sen. Rodger Smitherman, D-Birmingham, would require counties to offer in-person early voting options. HB 52, sponsored by Rep. Mike Ball, R-Madison, would require the state to notify absentee voters if a disqualifying mistake was made on their ballot so they can know not to repeat it. And HB 303, sponsored by Rep. Rod Scott, D-Fairfield, would require registrars to notify living voters who are being purged from the voter list.
What’s the bottom line?
All of the above bills would improve the health of Alabama’s elections and the responsiveness of those who serve in public office. In particular, establishing a clear and common-sense framework for people to regain voting rights after fulfilling the terms of their sentence would help ensure that everyone feels they have a chance to participate in our system of governance.
By Stephen Stetson, policy analyst. Posted March 7, 2016.
SB 91: A major step toward payday reform in Alabama
Payday loans in Alabama carry astonishingly high annual interest rates: up to 456 percent. These loans pose as a helpful source of credit, but far too often they act as financial quicksand, trapping borrowers in cycles of debt that can be nearly impossible to escape. A “Colorado-style” reform proposal seeks to give Alabama’s payday borrowers a less expensive path out of debt. (Click here for a PDF version of this bill overview.)
What is SB 91? This bill, sponsored by Sen. Arthur Orr, R-Decatur, proposes changing Alabama’s payday loan law to be more like Colorado’s law. Significantly, the bill would allow payday borrowers to pay down the principal in installments instead of the all-or-nothing, lump-sum payment Alabama now requires. The bill also would give payday borrowers at least six months to repay their loans. The interest rate cap on the loans would vary depending on the size of the loan and how quickly it is repaid. The maximum loan size of a payday loan would remain $500.
What about the 36 percent rate cap? Orr’s bill is not a 36 percent rate cap bill. The text of SB 91 mentions a 45 percent rate cap, but that figure can be misleading because the bill also allows lenders to charge additional fees. The interest rate under SB 91 would vary depending on how much money people borrow and how quickly they repay the loan. The maximum rate would be 188 percent a year, but in Colorado, because people often repay loans early, the average loan is at 115 percent a year.
Would this bill put Alabama payday lenders out of business? Absolutely not. In Colorado, the payday loan industry remains profitable. But the new law did shrink the industry’s size significantly in Colorado. Most people there still live fairly close to a payday lending storefront, but there are fewer stores. Alabama could expect to see a similar consolidation of the industry under SB 91.
Would SB 91 help borrowers? Payday loans would be cheaper, and borrowers would have longer to repay them. They also would be able to pay down the loan in installments. Some borrowers in Colorado are still struggling to repay, but many have avoided the long-term debt trap. If SB 91 passes, advocates will continue to seek ways to ensure borrowers are getting credit they can afford.
What about title loans? SB 91 addresses only payday lending. Auto title lending is authorized under a different Alabama law, and title lending reform would require different legislation.
What’s the bottom line? SB 91 strikes a middle ground, compromising between a 36 percent rate cap and a status quo that sinks far too many Alabamians deep in debt. The bill would force the payday loan industry to restructure its products. Borrowers still would face high-cost loans and the resulting risks of default, but SB 91 would provide more consumer protections on short-term, small-dollar loans. If industry-backed efforts to weaken the bill are rejected, SB 91 would result in a significantly improved payday lending landscape for Alabama consumers.
By Stephen Stetson, policy analyst. Posted Feb. 22, 2016.
A big win for second chances: Alabama's lifetime SNAP and TANF bans end
It’s a quiet win for thousands of Alabamians seeking to rebuild their lives and provide for their families: Alabama is joining the majority of U.S. states by allowing people with a past felony drug conviction to receive SNAP food assistance and TANF financial assistance, as long as they are otherwise eligible. The effective starting date for this change is Jan. 30, 2016.
The end of Alabama’s SNAP and TANF bans is good news for state budgets and for families. This policy change will help cut corrections costs in the cash-strapped General Fund budget by making it easier for released prisoners to reintegrate into the community, which will help reduce recidivism. Importantly, restoring SNAP and TANF benefits also will help prevent hunger and homelessness among some of Alabama’s most vulnerable families.
SNAP time limits: What you need to know
Many unemployed Alabama adults once again face strict time limits for assistance under the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. These “able-bodied adults without dependents” – folks who do not live in a SNAP household with children – will be allowed to receive SNAP benefits for only three months during a three-year period (ending Dec. 31, 2018), unless they either meet complex work requirements or are found to be exempt from the time limit.
This federal rule was part of the 1996 welfare reform law, but because of the recession, it has not been in effect for nearly a decade. Now that the economy has improved, reinstatement of this rule will deny food assistance for many of the nation’s most vulnerable low-income people. Because Alabama’s three-month clock started ticking Jan. 1, 2016, all able-bodied adults without dependents receiving SNAP on Jan. 1, 2016, will lose benefits on April 1, 2016, if they are not working, participating in job training or declared exempt. The change could cut off SNAP benefits for nearly 50,000 Alabamians and as many as 1 million people nationwide.
This fact sheet by ACPP policy analyst Carol Gundlach takes a closer look at the SNAP time limits, the exemptions from them in Alabama and the steps that service providers can take to help people affected by the limits.
All voices heard: How to modernize voting in Alabama
Alabama forever will be linked to the struggle for voting rights. An important question today is whether our state can shed its legacy of voter suppression, or whether we will continue to be seen as hostile to the idea of equal voting access and broad participation in democracy.
A 2015 report on healthy democracies ranked Alabama in last place out of 50 states and the District of Columbia. A big reason for the low ranking is our election participation policies. Alabama doesn’t allow pre-registration for 16- and 17-year-olds, and voters aren’t permitted to register online. We lack early voting, and Election Day is not a holiday.
Several proposals have been put forward to make voting easier in Alabama. They include bills to allow prospective voters to register on the same day as the election, give voters five days to cast a ballot, and automatically register eligible voters who apply for a driver's license, allowing them to "opt out" of voter registration instead of having to opt in. Digitization of voting records and restoration of voting rights also are potentially fruitful areas of reform.
'Ban the box' law would help rebuild lives in Alabama
How long should a mistake follow people through their lives? Should it prevent them from earning a living? The "criminal history checkbox" on many standardized job application forms often keeps otherwise qualified employees from making it to the next stage of the hiring process, where they could explain their past face-to-face. This creates discouraging barriers to employment for people who are looking to rebuild their lives after serving their time and paying their debt to society.
A nationwide "ban the box" movement is urging some simple but important changes to job application processes. Removing questions about conviction histories can level the playing field and give all applicants a fair chance to compete for jobs on the basis of qualifications and skills. Nineteen states, including Georgia, have removed the conviction history question from their applications for state jobs, and a growing number of major corporations have, too. Banning the box helps former inmates become productive members of society and provide for their families. It could do the same for thousands of Alabamians.
The Basics: WIC Saves Lives, Prevents Malnutrition
Congress established WIC in the 1970s to try to reduce disturbingly high infant death rates, and the program has been a success story ever since. Infant mortality rates in Alabama and nationwide have fallen by nearly two-thirds since the creation of the program officially known as the Special Supplemental Nutrition Program for Women, Infants and Children.
WIC has saved tens of thousands of lives and improved the health of hundreds of thousands, all while pumping billions of dollars a year into the economy. But WIC also sometimes runs out of money and has to remove participants until the next budget year. This fact sheet by ACPP policy analyst Carol Gundlach looks at what makes WIC so effective and considers some of the near-term challenges that may lie ahead for the program.
The Basics: Alabama's Meager but Vital TANF Program
The cost of living has increased in the last two decades, but federal money for temporary cash aid for very low-income families has not kept up. The federal government in 1997 froze its allocations for the Temporary Assistance for Needy Families (TANF) program, informally known as welfare. Since then, the number of families receiving benefits has plummeted in Alabama and nationwide, even as needs mounted during the Great Recession. Years of inflation also have eroded the buying power of Alabama's already meager benefits.
Fewer Alabama families are receiving TANF aid, and those benefits don't go nearly as far as they once did. This fact sheet by ACPP policy analyst Carol Gundlach details TANF's origins and structure, examines its eligibility requirements and considers how the program could do a better job of helping low-income Alabamians endure tough times.