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Payday lenders can keep making short-term, very high-interest loans in Alaska, but they'll have more rules to follow. Gov. Frank Murkowski has signed a bill clarifying the legal status of the industry and regulating it.
So-called "payday loan" companies typically give people cash advances for 14 days, in exchange for a postdated check. They often charge fees that, if calculated on an annual percentage basis, amount to interest rates of more than 300 percent.
Supporters of the bill said the final version protects consumers with tougher rules than most other states impose.
"I think we actually got to the point where if we had made it any tougher, we would have put all of these payday loans companies out of business," said Ed Sniffen, a consumer protection attorney with the state Department of Law.
But opponents argued that the real aim of the measure was to ensure that businesses they see as predatory can continue operating in Alaska.
"What it does is it legalizes an industry that in most places we call loan sharking," said Rep. Harry Crawford, D-Anchorage. "I don't think it should be a viable industry."
One payday lending company, Alaska First Cash, was sued last year by a customer on grounds that state laws do not allow such high-interest loans. Opponents of the bill argued it was intended to render the lawsuit moot.
However, Bud Wilson, co-owner of another lending company, Cash Alaska, said that was not the intent. He's confident the lawsuit would have failed. His company was pushing the bill on behalf of a group of lenders who believed the industry would benefit by having clearer guidelines, he said.
The bill was pushed by lobbyist Tim Kelly, a former state senator, who was hired by Cash Alaska.
In the months before the legislative session Cash Alaska co-owners Deborah Fink and Wilson contributed to the 2004 campaigns of several legislators who voted for the bill. Fink and Wilson gave $500 each to Rep. Tom Anderson, R-Anchorage, who sponsored the bill in the House, and Wilson gave $500 to Sen. John Cowdery, R-Anchorage, who sponsored it in the Senate.
Wilson said he contributes to political campaigns and other causes regularly, and the contributions had nothing to do with the bill.
Anderson and Cowdery did not return phone calls Wednesday.
During testimony, Fink defended the industry against charges of gouging customers. She said while consumer advocates complain about interest rates of more than 300 percent a year, that's not what her customers worry about. For them, a 15 percent fee for a two-week loan is a lot cheaper than a utility reconnection charge or a series of bad-check fees, she said.