"Lenders You Can Trust.  Only At Borrow Smart Stores!"

September 12, 2010

In response to this article in today's Birmingham News and in response to the Birmingham City Council's plan to introduce a moratorium against our industry tomorrow, we have sent the release below directly to all council members and to the Birmingham News.  The Birmingham News has indicated they will publish this response tomorrow.



According to an article in Monday’s Birmingham News, the Birmingham City Council will today discuss a moratorium against short term lenders (payday and title lenders) without any insight from state regulators, lenders themselves or customers of such businesses. Before Birmingham’s City Council considers limiting free enterprise in the state’s largest metropolitan area, they should take the time to study the facts.

The councilwoman championing this moratorium claims that short term loans are “nearly impossible to pay off.” The fact is, Alabama law does not allow payday loans in excess of $500, and, more importantly, customers by law must pay off the loan at the end of the initial 14 to 30 day loan period. Unlike more traditional consumer debt such as a credit card, Alabama law does not allow a customer to pay only the interest on such a loan: they must repay the loan in full.

The same champion of this proposed moratorium claims that these loans “strangle residents financially.” She must not be aware of multiple studies from the FDIC that show that states that have shut down the payday loan industry have experienced increased consumer bankruptcy rates and a huge rise in bank overdraft fees. A recent University of Chicago study also found that access to short term loans decreases the incidence of foreclosures and helps reduce theft.

The bottom line is that working Alabamians need access to short term credit for urgent, temporary financial needs. Short term credit helps families avoid bankruptcy and foreclosure, even reduces crime rates. If the research isn’t enough, hear from customers across the state who deeply appreciate the usefulness of these loans at The Birmingham City Council owes it to the customers who use and appreciate these loans to understand the facts before limiting business competition in the city.


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