InfoBytes Blog
Alabama Establishes Payday Loan Database
On September 18, Alabama Governor Robert Bentley announced new State Banking Department regulations that will create a state database of payday loans made to borrowers. Under the Alabama Deferred Presentment Services Act (DPSA), payday lenders are prohibited from making loans to borrowers with more than $500 in outstanding payday loan debt. According to the announcement, the Governor believes that the database is needed to enforce this restriction because lenders and borrowers can easily exceed the $500 limit by obtaining loans from multiple lenders. The regulations also implement other aspects of the DPSA, including a payday lender licensing regime. The database is expected to be operational by January 2014. Following the Governor’s announcement, a group of payday lenders reportedly filed suit in Montgomery County Circuit Court to prevent the state from implementing the database provisions. According to reports, the lenders argue that (i) the Banking Department is trying to create the database by regulation after it failed to obtain legislative authority to do so, (ii) the database is discriminatory because it does not apply to other lenders, such as banks and online lenders, and (iii) the state is unlawfully imposing a tax by charging payday lenders a fee to access the database.