Committee Seeks Increased Consumer Protections
January 21, 2004
The deferred deposit advance industry, recognizing consumer demand for small, short-term credit options, has rapidly expanded across the country. Thirty-nine states and the District of Columbia have specifically regulated the service; Alaska is currently unregulated.
Representative Tom Anderson (R-East Anchorage), Chair of the Labor & Commerce Committee, wants to make sure Alaskans are not taken advantage of in their most desperate times. "Hard working families are sometimes forced to live 'paycheck to paycheck' and sometimes the paycheck doesn't come soon enough. Alaskans use these services to bridge the time gap between paydays; it's a very stressful and difficult time. I want to be sure we provide a level of consumer protection to keep people from being overcharged during their time of need."
The new reform is designed to provide the industry with guidelines to engage in sound and responsible practices. A deferred deposit advance, commonly known as a payroll advance, allows consumers with a checking account and a regular income source to receive a short-term cash advance, generally against their next future paycheck. Alaskan deferred deposit providers service the vast majority of these cash advances through independent storefront locations.
This bill specifically proposes licensing and record-keeping requirements, limits on terms and the number of allowable renewals, fees, and reasonable limits on the amount of the advances. It would provide the consumer detailed information about the type of service and require full disclosure for all fees and costs incurred during the advance process. Additionally, provisions of the bill create a next day "change of mind" provision allowing the consumer time to reconsider their decision for any reason.
The proposed measure is modeled
after legislation suggested by the Council for State Governments,
and American Legislative Exchange Council, and enacted laws in
several other states.
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