BIRMINGHAM, Ala. (WIAT) — High payday loan interest rates are becoming so much of a problem that bankruptcy lawyers are having to step in to do something about it.
The issue of payday loans has been brought up at the Statehouse several times before. Each time nothing has moved forward.
The partners at Bond, Botes, Reese & Shinn started a Change.org petition to get the attention of state lawmakers.
They’re asking for a cap on payday loan interest rates at 36%.
Right now, interest rates on payday loans average about 300-400%, with Alabama having some of the nation’s highest rates.
Problem is, with rates like that, it’s hard for people to pay off their debt.
Attorney Robert Reese says over the last couple of years the firm has seen a huge increase in these types of loans.
“They get stuck in that cycle and they just keep renewing and renewing those and it’s been a real problem and has forced many people into various bankruptcy cases,” said Robert Reese.
Reese says many of his clients were having to pay high interest rates on loans being taken out for as little at $500 all the way up to $3,000.
“Many times the amount of the loan, the amount to pay it back is more than they can handle and so they’re forced to renew the loan by paying the interest that is accrued over the last 30 days,” said Reese.
He says that can sometimes be overwhelming for people who may already be strapped for cash.
Attorney Reese says payday loan lenders have a purpose but they should be fair.
“They can provide a service to people who may not be able to get lending through traditional lender like a bank or credit union but the interest rate at 300-450 percent that’s just too much,” he said.