The Debt Trap: Title and Payday Loans in Mobile, AL
- Nicknames: The Port City, The Azalea City1
- Population: 619,1041
- Website: http://www.cityofmobile.org/
The people in Mobile, Alabama face a tough road.
Regulation against payday and title loans moves at a slow pace. If legislators continue to take campaign contributions from payday and title lenders, it seems unlikely that they’ll vote in favor of harsher regulation for predatory lenders.8
That leaves the underbanked residents of Mobile having to choose between failing to repay important bills or taking out a dangerous and predatory loan.
Introducing Mobile, AL
Located on the gulf side of the state, Mobile is closer to New Orleans and Florida than other cities in Alabama. Even with a population of 619,1041, Mobile is the third-largest city in the state.
Mobile is rife with economic and financial troubles that contribute to an economic environment favorable to payday and title lenders. The average poverty rate in Mobile is 23.1 percent2, almost 10 percent higher than the national rate of 13.5 percent.3 Poverty in the South is a common occurrence, but Mobile’s problems are unique.
The city has a job growth rate of -0.39 percent, which means that more jobs are being lost than created. Other cities in Alabama such as Birmingham and Huntsville report positive job growth rates, so the problem is almost perfectly isolated to Mobile.
The total city debt for Mobile is approximately $275,000,0004 and the debt per capita is approximately $1,409.45.
Like other Alabama cities, the discrepancy between the living wage and the minimum wage in Mobile is stark. Currently, the living wage in Mobile is $11.22 per hour for one adult, $22.07 for one adult and one child, $27.86 for one adult and two children. The minimum wage is $7.25.5
The cost of living in Mobile is $23,334 a year for one adult, $45,896 for one adult and one child and $57,950 for one adult and two children and the median household income is $39,241.6 36.97 percent of Mobile residents rent.7
When there’s any kind of difference between how much people need to live on and how much they earn, poverty rates will increase and afflicted residents will turn to payday and title loans in times of crisis. It would be impossible to separate the effects of Mobile’s disastrous economy and the rate of citizens using payday and title loans.
The average payday loan borrower in Mobile, Alabama, borrows eight loans per year.9
Payday Loans in Mobile, Alabama
In 2015, the residents of Mobile Alabama, took out 2 million payday loans.9
Payday loans are a common tool for people who don’t have the ability to take out a credit card or personal loan. The latter often require good credit scores and clean credit reports, which can be difficult for people with low income and unstable jobs.
So they turn to payday loans, which operate both on-line and in-store. When you take out a payday loan, you often have between two to four weeks to repay the amount. However, most people aren’t able to scrounge up the money in time, leading them to refinance the loan. Every time they do that, the interest compounds and the problem grows. Because the repayment length is so short, people struggle to repay their loans before the first payment is due.
The League of Women Voters of Alabama said in a report, 66 percent of payday loan customers refinance their loans, often more than once.9 Another article published in a local paper quoted the following: “Stephen Stetson, a policy analyst at Alabama Arise, said the repeat usage suggests that people are using the loans to pay recurring expenses and not just for emergencies. ‘These loans are marketed for emergency use only. If somebody is taking out that many in a year, it means they are using them to pay the bills,'” Stetson said.10
Another major issue with payday loans is that the lender gets access to your bank account when you take out the loan. If you don’t have enough funds in your account when the lender tries to collect, you’ll overdraw and have to pay even more fees to your bank, often hundreds of dollars at one time. This can create even more instability for borrowers.
Alabama has one of the highest average interest rates for payday loans at 456 percent, along with South Dakota and Wisconsin, which both charge more than 500 percent APR.11
With such a high local poverty rate and negative job growth rate, it shouldn’t be surprising that people resort to payday loans and then find it impossible to repay them in a timely manner.
A Personal Encounter with Payday Loans in Mobile, Alabama
One of the reasons that people use payday loans is that they don’t have access to credit cards, which charge lower fees and have higher limits. However, some people also get confused by credit cards and their interest rates compared to payday loans. Payday loans in Alabama can charge 456 percent12 APR, while the APR for a credit card is likely to be less than 30 percent.13
However, some people compare the simple interest rate to the annual interest rate and think that credit cards are actually worse than payday loans.
“For example, a borrower from Alabama stated: ‘Because the interest on . . . some credit cards [is] 23.99 percent. So if you go charge $300, and then you don’t pay that $300 off at the end of the month . . . they’re going to tack that 23.99 percent on to it, so you’re going to still be paying more than you would if you had to [get a payday loan].”14
This kind of financial illiteracy is also partly responsible for the high rates of payday lending in Alabama. When consumers don’t know the difference between the interest rate you pay in a month and the rate you pay in a year, they’re going to be tempted by the ease and convenience of payday loans. This is partially why many non-profits aim to educate citizens about the best types of loans and how to save money for emergencies, so they know to avoid payday loans when they’re desperate.
Mobile Alabama Payday Loan News
- Residents of Alabama used payday loans two million times in 2015, with the average borrower using eight loans total. The payday loan database showed that there were 246,824 unique users. The entire state has slightly less than five million inhabitants, which means about 5% of the population is relying on payday loans.15 The fact that customers took out multiple loans reinforces the idea that payday loans are impossible to pay off in such a short time and that consumers need a longer window.
The unfortunate part of payday lending in Mobile is that high interest rates weren’t available until 2003, when the legislators allowed payday lenders to charge exorbitant rates.16 Since then, lawmakers have continued to allow predatory lenders to tack on some of the highest fees in the country, which affects the most vulnerable citizens. Reverend Scott Dawson said, “Exploiting the poor through predatory lending practices was wrong in Biblical times and it remains wrong in Alabama communities today. Sadly, the state of Alabama has a true problem when it comes to predatory, toxic loans, and it is time for a change.”17
In 2016, there were 900 licensed payday loan lenders in Alabama. (The third largest concentration nationwide.)8
Title Loans in Mobile, Alabama
Because payday loans in Mobile are limited to $500, many consumers seek another way to get cash quickly: title loans. A title loan is a loan made in exchange for using your car as collateral against the loan. Because title lenders are allowed to give out much more than payday lenders, they’re a popular option for consumers who need to borrow more than $500.
However, one of the worst aspects of title loans is that they require you to hand over possession of your vehicle to a lender if you’re not able to repay the loan. For most low-income residents of Mobile, their car is their biggest asset. It’s how they get to work and how they pick up their kids from school.
Since public transportation is a huge problem in cities like Mobile, many are limited if they don’t have a car. Almost 100% of respondents in a report from the Pew Charitable Trusts said they used a car to travel to school or work as well as to medical appointments and to buy groceries and other household goods.13
Like payday loans, title loans are almost impossible for consumers to pay back.18 In Alabama, title lenders are allowed to charge 300% APR, which amounts to a huge sum since most title loans are more than $1,000.14
“The average $1,000 title loan with a typical $250 fee requires a lump-sum payment of $1,250 after 30 days, far more than most borrowers can afford.”
This report claims that title loans are a bigger problem than payday loans in some cases. “On average, the larger loan sizes in the title loan market also lead borrowers to spend more than double the amount payday loan borrowers do annually.”13
A Personal Encounter with Title Loans in Mobile
According to the Center for Responsible Lending,15 Alabama is one of the worst states in the country when it comes to title loans. There are 672 car-title lenders in the state with an adult population of 3,647,277. That means, for every 5,427 people, there is one car-title lender – which is the highest concentration in the country. This ratio explains why residents in Mobile are so quick to turn to title lenders- they’re available more than they are in any other state.
That might explain why Frances Beck felt so comfortable taking out a title loan when she was short on cash. She was a single mother who was providing for herself and her child when she had to complete an unpaid internship to graduate with her degree. Unable to afford not working, she took out a title loan to pay for her expenses.
But she couldn’t pay off the loan when it came due so she kept rolling it over again and again. In seven months, Beck had paid $2,000 in interest on a $3,200 loan. Eventually she got lucky and one of her professors paid off the loan she could repay him the amount with no interest.16
A study published in the University of Illinois Law Review said that the main problem with title loans isn’t that cars end up repossessed, but that consumers aren’t aware of how much a title loan could cost them. Most people assume they’ll be able to repay it when it first comes due, but that’s not often the case.
“Policymakers should require that title lending companies post information about how people actually use title loans: information about the number of times people roll over their loan, the amount of money those rollovers cost in total, the number and amount of late fees and other fees people pay, and the likelihood of defaulting on the loan,” the study said.17
If borrowers knew that they would spend thousands more on interest, they would probably find other ways of getting the money they need.
What Lawmakers in Alabama Are Doing
"Exploiting the poor through predatory lending practices was wrong in Biblical times and it remains wrong in Alabama communities today. Sadly, the state of Alabama has a true problem when it comes to predatory, toxic loans, and it is time for a change."
Alabama wasn’t always a hot bed for payday and title loans. At one point, they had strict laws against high interest rates for predatory loans, but now times have changed.
It’s not a surprise when you consider how much money payday lenders have given to local lawmakers.
“Payday lenders gave more than $475,000 to lawmakers during the last election season, including top legislative leaders and members of key legislative committees.”8
Other reports say that, “Lobbying efforts by lenders in 2002 resulted in the modification of the Alabama Small Loan Act that provided an alternative rate schedule increasing allowable loans to approximately 190% APR (Act 1959-374 Sect. 5-8-15, Alternative rate schedule, subsection (m)).
In 2016, a bill proposing stricter interest rates passed the House Financial Services Committee. It advocated lowering the fee to $15 for every $100 lent and increasing the minimum repayment
term to 30 days. This would have effectively created an annual interest rate of 180% – more than 50% less than the current law.
Another bill proposed by State Senator Arthur Orr promised to create regular payments for payday loans, instead of the lump-sum system that currently exists.25 Borrowers would have up to six months to repay their loan, which would keep fees low. Unfortunately neither bill passed and constituents are still waiting to see if true payday reform will happen in Alabama anytime soon.
Interested parties should contact their representatives and let them know how they feel about payday loan reform. The voice of the masses should be heard so lawmakers feel more enticed to pass meaningful legislation.
In 2013, there were 672 title lenders in Alabama.15
Helping Consumers in Mobile, Alabama
Even though title and payday loans are legal in Mobile, that doesn’t mean every lender is always following the rules. Many try to include stipulations in contracts that are illegal or fail to notify consumers of what their loan will actually cost in the long run. Some are operating with an inactive license or have never been properly licensed.
One of the few ways to shut down a payday or title lender is to file a complaint about them, which can trigger an investigation. If you’d like to file a complaint against a payday or title lender in Mobile, you have to reach out to the State Banking Department at http://www.banking.alabama.gov. From there, you will find the complaint form which you can mail or email to the following location:
The form requires that you detail exactly what your issue is, if you’ve complained to anyone else about this matter, if you’ve hired an attorney, and what kind of resolution you’re looking for. You should also include copies of the original contracts you signed. Do not include the originals as you may need those later.
Before filing your complaint, make sure that the organization you’re reporting is licensed with the state. You can find their license information through the Bureau of Loans. After you’ve filed your complaint, you should try to reach out every couple weeks to check on the status of your case. It’s unclear how long it will take before issues are resolved.
If you want help pursuing your case, you can look into low-cost or free legal clinics in Mobile. These include the following:
Why Payday and Title Lenders Thrive in Mobile, Alabama
Payday loan customers are 57% more likely to rent and 62% more likely to earn less than $40,000 a year.11
One of the main reasons why payday and auto tile lenders thrive in Mobile is because of the demographics of the city. High use of payday loans usually these statistics correspond to higher payday lending rates, according to the Pew Charitable Trust Report, “Payday Lending in America: Who Borrows, Where They Borrow, and Why.”11
This report states that payday loan customers are 57% more likely to be renters and 62% more likely to be earning less than $40,000 a year. These statistics correlate positively to Mobile residents, proving that low-income folks are more likely to rely on payday loans.11
While legislation is one way to get rid of predatory lending, it won’t fix the reasons why citizens turn to these types of loans. Better jobs, higher wages and a stable economy are the only ways that residents won’t roll the dice on these risky loans. When people live paycheck-to-paycheck, they rely on payday and title loans when there’s an emergency. But if they have adequate salaries and financial education, they won’t have to feel compelled to enter a payday loan storefront.
Outside Help for Payday and Title Loans in Mobile
Help is available for people in Mobile who need it. Here are some organizations who provide financial assistance and other services to qualified individuals:
- Alabama Department of Human Resources: The Family Assistance program provides cash to families who have children 18 and younger (or 19 if they’re a full-time student). They also provide employment training to help people receiving financial aid so they can find work.
- The Alabama Housing Finance Authority: This organization helps families find affordable housing, both to rent and to buy. Affordable housing can help families strapped for cash and help them avoid turning to title or payday loans. Applicants need to earn less than the median income in order to qualify.
Regulating Auto Title Loans in Alabama
Regulating title loans is not just a problem in Alabama, it’s a national issue. The Consumer Financial Protection Bureau drafted a rule in October 2017 that would force these types of lenders to determine if borrowers can afford to repay the loan before giving them the money.
Research from the Southern Poverty Law Center said, “The latest data in Alabama showed that, on average, borrowers who took out these loans were trapped in debt for 168 days.”19 This rule should become official in 2019, but it remains to be seen if the federal government will support this rule – or oppose it.
Guides to Payday and Title Loans in Other Alabama Cities
You know payday and title loans in Mobile are a problem. But what about other cities in Alabama?
Check out these payday and title loan guides for the following cities in Alabama…
 “Mobile, Alabama” Wikipedia.com. Accessed Jan 3rd, 2018 from https://en.wikipedia.org/wiki/Mobile,_Alabama
 “Quick Facts: Mobile City, Alabama” Census.gov. Accessed Jan 3rd, 2018 from https://www.census.gov/quickfacts/fact/table/mobilecityalabama/AGE295216
 “What is the current poverty rate in the United States?” Poverty.UCDavis.edu. Accessed Jan 3rd, 2018 from https://poverty.ucdavis.edu/faq/what-current-poverty-rate-united-states
 Quynh, Jacqueline. “Mobile Reduces $45 Million In Debt; Still Needs More To Change Credit Rating” WKRG.com. Accessed Jan 3rd, 2018 from ://wkrg.com/2016/09/12/mobile-reduces-45-million-in-debt-still-needs-more-to-change-credit-rating/
 “Living Wage Calculator for Mobile, AL.” LivingWage.MIT.edu. Accessed Jan 3rd, 2018 from http://livingwage.mit.edu/metros/33660
 “Mobile, Alabama.” BestPlaces.net. Accessed Jan 3rd, 2018 from http://www.bestplaces.net/economy/city/alabama/mobile
 “Mobile Alabama Residential Rent and Rental Statistics.” DeptofNumbers.com. Accessed Jan 3rd, 2018 from http://www.deptofnumbers.com/rent/alabama/mobile/
 “Payday Lending Stores in Alabama: Facts and Issues” LWVAL.org. Accessed Jan 3rd, 2018 from http://www.lwval.org/payday-lending/payday-lending-facts-&-issues.pdf.
 “Alabamians used payday loans two million times in 2015.” AL.com. Accessed Jan 3rd, 2018 from http://www.al.com/news/index.ssf/2016/09/alabamians_use_payday_loans_tw.html.
 Berte, Neal. “Alabama’s Toxic Lending Problem: Who cares?” AL.com. Accessed Jan 3rd, 2018 from http://www.al.com/opinion/index.ssf/2017/05/alabamas_toxic_lending_problem.html.
 Bourke, Nick. “Payday Lending in America: Who Borrows, Where They Borrow, and Why” PewTrusts.org. Accessed Jan 3rd, 2018 from http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2012/pewpaydaylendingreportpdf.pdf.
 “Alabamians used payday loans two million times in 2015.” AL.com. Accessed Jan 3rd, 2018 from http://www.al.com/news/index.ssf/2016/09/alabamians_use_payday_loans_tw.html.
 Bourke, Nick. “Auto Title Loans: Market practices and borrowers’ experiences.” PewTrusts.org. Accessed Jan 3rd, 2018 from http://www.pewtrusts.org/~/media/assets/2015/03/autotitleloansreport.pdf.
 Stetson, Stephen. “The high costs of payday and title lending in Alabama.” ArizeCitizens.org. Accessed Jan 3rd, 2018 from https://arisecitizens.org/index.php/component/docman/doc_view/1160-the-high-costs-of-payday-and-title-lending-in-alabama?Itemid=44
 Fox, Jean Ann, et al. “Driven to Disaster: Car-Title Lending and Its Impact on Consumers.” ResponsibleLending.org. Accessed Jan 3rd, 2018 from http://www.responsiblelending .org/other-consumer-loans/car-title-loans/research-analysis/CRL-Car-Title-Report-FINAL.pdf.
 Izor, Chris. “VIEWPOINTS: Alabama leads nation in car-title loan outlets.” Blog.AL.com. Accessed Jan 3rd, 2018 from http://blog.al.com/birmingham-news-commentary/2012/09/viewpoints_alabama_leads_natio.html.
 Patterson, Jim. “The trouble with car title loans is NOT people losing their cars.” News.Vanderbilt.edu. Accessed Jan 3rd, 2018 from https://news.vanderbilt.edu/2013/04/01/car-title-loans-people/.
 “A step in the right direction for Alabama borrowers.” AriseCitizens.org. Accessed Jan 3rd, 2018 from http://www.arisecitizens.org/index.php/component/content/article/22-publications/fact-sheets/3269-sb-91-a-step-in-the-right-direction-for-alabama-borrowers.
 Zampierin, Sara. “US House to vote on bill that would eliminate proposed predatory loan protections.” SPLCenter.org. Accessed Jan 3rd, 2018 from https://www.splcenter.org/news/2017/06/06/us-house-vote-bill-would-eliminate-proposed-predatory-loan-protections