Alabama Payday Lending Laws

Many Alabama citizens live from paycheck to paycheck. At times they find themselves needing short-term payday loans to make ends meet sometimes. According to the Alabama Department of Banking, 189,231 Alabamians took out 1.6 million payday loans worth about $563.6 million in 2019.

Payday loans are quick turnaround cash loans that supposedly benefit the borrower in a time of need. The payday loans, however, come at a steep price. Namely, the high-interest rates and fees of these loans can easily trap the borrower in an endless cycle of debt. According to the department of banking’s data:

  • About 37% of the 2019 transactions were for $500, while the average loan amount was $348;
  • about 66% of borrowers paid fees between $50 and $100;
  • over 80% of the 189,231 borrowers took out more than one payday loan; and
  • they paid about $98.4 million in fees.

Payday Loan Regulations in Alabama

The Alabama Legislature instituted the following rules and regulations to restrict payday lending in the state:

  • Maximum loan amount: $500
  • Minimum loan amount: $100
  • Maximum loan term: 31 days
  • Minimum loan term: 10 days
  • Maximum APR: 456.25%
  • Maximum finance charges: 17.5% of the amount borrowed

Despite these restrictions, hundreds of payday lenders operate daily in Alabama and continue to negatively impact Alabama’s low-income citizens and communities.
While groups have lobbied for reforms of the predatory lending laws in Alabama, namely seeking a cap on the annual percentage rate, so far the legislature has not agreed to advanced restrictions.

Those advocating for greater restrictions do not necessarily seek to abolish payday loans. They understand the importance of having access to short term loans for Alabama low-income citizens. Instead, they seek a level playing field whereby the payday lenders interest rates are capped at a lower percentage that will not leave borrowers in a worse financial condition.

Get Help with Your Payday Loans

Are you stuck in a never-ending cycle of renewing monthly payday loans? If so, bankruptcy might provide a solution to your financial troubles.
Many payday loans can be discharged through bankruptcy. To find out if bankruptcy could solve your payday loan problems, contact Brock & Stout for a free evaluation of your financial situation. Our bankruptcy attorneys have over 20 years of experience helping clients like you get a financial fresh start. Let our family help your family.