New legislation filed in the Alaska House of Representatives by Rep. Stanley Wright, R-Anchorage, proposes to significantly restrict the interest rates and fees that can be charged by payday loan companies in Alaska.
House Bill 145 would remove special exemptions for payday loans in the state’s lending laws, restricting payday loan companies to the interest rates and fees charged by normal banks.
According to figures from Wright’s office, about 15,000 Alaskans take out payday loans each year.
State law ordinarily limits loans to a 36% maximum annual percentage rate, but under a 2004 law passed by the Alaska Legislature, payday loans receive special exemptions and can charge as much as 521.4% interest annually, according to information provided by Wright’s office.
“These predatory loans take advantage of the dire situations of individuals and special exemptions that are written into statute,” Wright said in a written statement.
Legislative records show that lawmakers were warned in 2004 by the AARP, Alaska Public Interest Research Group Alaska Legal Services and the Alaska Catholic Conference that their bill would allow excessive interest rates despite state regulation and permitting, but they passed the legislation anyway.
In a brief interview, Wright said the inspiration for his bill came from anecdotal stories he heard while running for office in his northeast Anchorage neighborhood last year.
“There’s a lot of folks in my district that have these kinds of issues, where they’ve been trying to take advantage of something that sounds good, like a payday loan,” he said. “And then they don’t understand that the interest rate is going to be insane, and the space is set up for you not to be able to get out of it.”
The bill has been scheduled for a hearing at 3:15 p.m. Friday in the House Labor and Commerce Committee.
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