Alabama's PAYDAY LOAN problem

President Barack Obama is expected to speak on payday lending in Birmingham on Thursday. 

The president Thursday afternoon will deliver a speech on economic development at Lawson State Community College. Rep. Terri Sewell has said it will concern payday lending.

Payday lending is big business in Alabama. The only states with more payday lenders per capita than Alabama are Oklahoma, South Carolina, Louisiana and Mississippi.

But it's also been a contentious subject in policy. Some say the industry hurts the poor.

Here's the long and short of the payday lending debate in Alabama:

The Good

When used for the right reasons, payday lenders provide access to short-term loans to people that otherwise couldn't get them.

When people have small unexpected expenses, like a necessary car repair or a minor emergency room visit, payday lenders provide quick access to a short-term loan. 

Some studies report that payday lending results in fewer bounced checks and bankruptcy filings.

Industry advocates say the businesses ultimately save customers money, because the interest on a short-term loan is often cheaper than a bounced check fee.

The Bad

You've probably heard the phrase "It's expensive to be poor." 

Payday loans are expensive. In Alabama, lenders are allowed to charge up to $17.50 per $100 borrowed - that translates to an annualized interest of 456 percent.

Some say the loans are predatory. An Auburn study last year said payday lenders tend to locate in heavily black neighborhoods.

Some groups like Alabama Arise call for more regulation on the industry, saying the stores prey on the poor. When customers take out loans for recurring expenses for things like rent or utilities, they can quickly get in over their heads. 

State law forbids a person from taking out more than $500 in payday loans at a time. But that's difficult to enforce. When a customer maxes out at one business, they can just go to another store to take out a loan to pay the original lender back.

The Legislation

Several Alabama cities - including Birmingham, Helena and Alabaster- have either passed regulations on payday lending or discussed it.

For more than 10 years, several Birmingham area cities have enacted moratoriums against the businesses, including Fairfield, Clay, Irondale, Trussville and Center Point.

Some states, including Arkansas and Georgia, have banned payday lending altogether, but some studies have show that demand for short-term loans doesn't go away after they are outlawed. In Georgia, for example, there are no payday lenders, but "industrial loan services" offer a similar short term loan.

Gov. Robert Bentley announced the creation of a centralized payday loan database to make help enforce the $500 limit on the amount of loans a person can have - lenders would check the database to see if a customer has reached their limit at other institutions. 

But payday lenders sued Alabama's Banking Department to block the creation of the database. A judge in Montgomery ruled against the industry in August and the industry appealed. 

The database is on hold pending the outcome of the case.