I have lived in Birmingham, Alabama most of my life. I love Birmingham. Beautiful, scenic rolling hills. Friendly people with charming accents. Outstanding barbeque and even better football. First time visitors almost always comment that Birmingham exceeds expectations.
Well, apparently our federal friends in Washington, D.C. agree. The Obama Administration and the Consumer Financial Protection Bureau (CFPB), the federal agency responsible for protecting consumers by carrying out federal consumer financial laws, have put Birmingham front and center in the payday lending debate.
In January 2012, only a few weeks after President Obama appointed Richard Cordray to be the first Director of the CFPB, the CFPB chose Birmingham as the venue for its first field hearing. The topic was payday lending. Fast forward to March 2015, President Obama made his first trip to Birmingham as President to deliver a speech at Lawson State Community College on middle-class economics. The President’s speech focused on new proposed payday lending rules.
Regulation of the short-term, small dollar, or ‘payday lending’ industry, has become a hot-button social and political issue over the last few years. The subject has permeated the late night talk shows and even grocery store conversations. So, why would the CFPB and Obama Administration choose Birmingham, Alabama— the largest city in one of the most conservative states— as their home field for the payday lending debate?
In my opinion, as a consumer finance lawyer and a long-time resident of Birmingham, the answer is three-fold: history, socio-economic factors, and the industry environment.
For many, Birmingham evokes memories of the Civil Rights Movement and the ugly struggles associated with it. There is no denying that images of fire hoses and police dogs are a part of Birmingham’s past. A generation later, Birmingham chooses to remember this history and celebrate the accomplishments of those who fought for equality.
The backdrop of this history brought the CFPB to Birmingham in January 2012. Acknowledging this, Director Cordray remarked, “[I]t is a privilege for us to visit Birmingham, where so many people endured police dogs and fire hoses in their pursuit of freedom. The fundamental principles of dignity and equality that powered the civil rights movement also animate our work at the [CFPB].” This historical context certainly played a role in the CFPB choosing to host its first field hearing in Birmingham.
Like many cities in 2015, Birmingham is far from perfect; and, our most prevalent problem is the socio-economic divide. Put simply, Birmingham has a severe poverty crisis that disproportionately affects minorities. Critics of the payday lending industry claim that payday lenders perpetually keep poor borrowers in a never-ending cycle of debt.
In a recent article on al.com entitled “Why I came to Birmingham,” President Obama explained, “Our top priority should be helping everybody who works hard get ahead. That priority is what brought me to Birmingham.” And then transitioning to the discussion of payday lending, the President further noted, “[O]ne way to make sure paychecks go farther is to make sure working families don’t get ripped off.”
Our Payday Lending Industry:
Alabama has a robust payday lending industry. Over the last several years, proponents and opponents of payday lending have fought several high-profile battles—most recently municipal moratoriums and an attempt to block the creation of a statewide payday lending database.
In 2012, according to the CFPB press release, one of the reasons the CFPB chose Birmingham is because “Alabama is a state with one of the highest number of payday lenders per capita in the country.” Similarly, in his speech in March, the President also noted, “There are four times as many payday loan operations here in Alabama as there are McDonald’s.” Clearly, the numbers have caught the attention of the CFPB and the Obama Administration.
Maybe I am reading too much into this. Maybe it is a coincidence. Maybe the CFPB and President are just interested in the beautiful Alabama scenery or the world-class football. Call me skeptical, but I don’t believe in coincidences in politics. I think Birmingham has become the center of the payday lending debate, y’all.