As of last Thursday, U.S. President Barack Obama has now made two visits to Alabama in one month.
Several weeks ago, the President made his first appearance at the 50th Anniversary of Bloody Sunday in Selma. He came to Lawson State Community College in Birmingham last Thursday to discuss economic plans, including payday loan lenders.
During his speech, Obama introduced the term “middle-class economics,” explaining his belief that “the country does best when everyone has a fair shot.”
By a "fair shot," he wants to make student loans more affordable and community college free for everyone. Obama openly disagreed with the Republicans’ proposed budget that he felt focused more on giving the wealthy 10 percent more tax cuts than it did on helping the middle class, which is the opposite of what he wants to see happen.
“Our top priority should be helping everyone who works hard to get ahead,” said Obama.
Although Obama was speaking at a college, his main goal for coming to Birmingham was not to discuss education, but to discuss a new step in middle-class economics.
“One way to make sure paychecks go farther is to make sure working families do not get ripped off,” Obama said.
He introduced a new consumer watchdog called the Consumer Financial Protection Bureau (CFPB). The CFPB was created a few years ago as a result of the Wall Street Reform. This bureau will work with state and local governments to regulate fees and interest charged to consumers for loans, which Obama described as “creating a cycle of debt” for consumers.
According to the CFPB, the average pay day loan consumer is in debt 200 days of the year.
The reason Obama came to Alabama to take about this topic is because he felt this area is most affected by pay day loan businesses.
“In Alabama, there are four times the payday lenders than McDonald’s,” said Obama. “There are a lot of McDonald’s.”
Even in Russellville, where there is a church on every corner, there are almost as many pay day loan lenders. New regulations imposed by the CFPB could make it difficult for many of these businesses to stay open.
“We are already regulated by the Alabama State Banking Department, which audits us every year, and we follow the law to the letter,” said David Grissom, the owner of Alabama Gun and Pawn.
Grissom believes that the federal government is looking to regulate payday loan lenders because it is a niche in the financial industry and is relatively new. However, he does not understand why it is seen in such a negative light.
“People can borrow up to $500, which is the most we can allow anyone to borrow,” said Grissom. “People can not get that amount at a bank, so they come to us. It is usually very good people who had unexpected things happen to them.”
Max Wood, on the Board of Directors for a trade organization called Borrow Smart, said the average annual income of a pay day loan borrower is $40,000.
“There are 1,000 licensed operators in Alabama who are regulated by the federal and state government,” said Wood. “Three hundred thousand Alabamians are served by these operators, and they depend on our services. Last year, four million pay day loan transactions took place and only four complaints were filed. We are the most economical alternative of the bank.”
Wood also shared that if the CFPB imposed new regulations on the current 1,000 operators, 80-90 percent will not be able to stay in the business. However, it will take some time before new regulations can be enacted because the proposed regulations would have to go through a formal hearing process.
While pay day loan lenders are wondering what regulations the CFPB will bring their way, the Alabama Republican Party felt that the President should focus on other issues.
“In order to have a payday, you have to have a job," read a statement released by the Republican Party in response to the President's speech. "Obama is addressing the problem of the economy backwards. He should be focusing on stabilizing the economy so that everyday Americans don’t feel they are in a desperate enough circumstance where they think payday loans are necessary.”
