HB145, sponsored by Rep. Stanley Wright, is making its way through the House and must be passed to protect Alaskans and keep more wealth in Alaska. In its most simple terms, HB145 closes the loopholes and exemptions allowing payday lenders to charge absurd and unethical interest rates: up to 521% APR.
It’s easy to understand how such a steep interest rate would be difficult to pay back. Anyone who’s been saddled with credit card debt knows that it can take years to pay back an amount that once seemed trivial. For comparison, though, WalletHub puts the average interest rate on existing credit cards at 21.59%, and the average payday loan in Alaska is for $440 with a 421% APR. A $440 loan would require a monthly payment of $137 just to keep up with interest, and if you were able to pay the loan back in five months, that $440 loan would cost you more than $1,200 in repayment.
The cap that applies to most lending in Alaska sets the interest limit at 36%. That limit, set in the Small Loans Act, Alaska Statute 06.20.330, allows for an exemption for payday loans. HB145 would remove that exemption.
In addition to being a potentially crippling financial burden for someone already on the brink of financial collapse (making it difficult if not impossible to afford increasing rent prices), profit made from the interest of most of these loans goes to out-of-state lenders. Currently, an online lender could still charge the high rate allowed in their state. Each year, such lenders take $29 million from 15,337 Alaskans (AKPIRG). HB145 includes an anti-evasion provision to close this loophole.
It is time to stop these harmful financial practices. Pass HB145. Protect Alaskans, and keep more Alaskan wealth here in Alaska.
— Lindsy “Louie” Glick
Anchorage
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