Senate hearing on SB 39 pits consumer advocates against lenders over 36% APR cap for small‑dollar loans

Sen. Forrest Dunbar introduced Senate Bill 39 to the Senate Finance Committee on March 20, proposing to align Alaska's rules for short‑term small‑dollar loans with existing 36% APR caps that currently apply to other small loans and to the federal protections for active‑duty service members.

Dunbar told the committee the bill would "bring regulations for payday lending businesses in line with those already governing traditional lenders," and said payday products frequently trap borrowers in cycles of debt. He cited data from the Alaska Public Interest Research Group that found an average APR of about 421 percent on payday loans in Alaska and an average loan size of $440; "for the average $440 payday loan taken out in Alaska, it would take $137 to keep up with the first month's interest," he said. Dunbar also told the committee that from 2017 to 2022 payday lenders garnished more than $3.7 million from Alaskans' Permanent Fund Dividends.

Consumer‑protection and community witnesses urged the committee to pass the bill. Claire Lucky, economic justice lead at the Alaska Public Interest Research Group, said the average payday borrower in Alaska "picked up more than 5 loans per year," and recounted a mutual‑aid project in Anchorage that paid off payday loans for 25 Alaskans. Lucky quoted a participant who advised a neighbor, "don't do it. If there is any way that your family can help, try that first. Ask your church. Try a bank." Other supporters, including faith leaders, the Food Bank of Alaska, the Alaska Children's Trust and AARP Alaska, described high rates and repeated borrowing as drivers of financial instability and harms to families and older adults.

Industry and lender witnesses opposed the bill or urged changes to its language. Check City vice president Court Walker, an Alaska‑licensed deferred‑deposit lender, said the company's loans limit fees to 15% of the amount borrowed and warned the bill would "eliminate credit choices for Alaskans." Trade and fintech representatives from the American Financial Services Association, Hudson Cook (bank‑partnership counsel), Opportunity Financial, INFIN (a trade association of state licensed consumer lenders) and platform and lender trade groups argued SB 39's definition of interest and an "anti‑evasion" provision could sweep in many loans, impair bank partnerships, and disrupt secondary‑market loan transfers. Hudson Cook attorney Kathy Brennan described concerns that the bill's anti‑evasion language could recharacterize a bank's service provider as the true lender and "impair banks from making legal loans to Alaskans."

Committee members asked about evidence from other states and whether a 36% cap simply removes a product without producing alternatives. Dunbar said proponents had spoken with lenders operating in multiple states and that 19 states had adopted similar reforms, and he offered to seek additional written analysis about bankruptcy and access impacts. Committee staff read a fiscal estimate from the Department of Commerce, Community and Economic Development showing a negative $19,000 general‑fund revenue change under the banking and securities appropriation; no committee vote was taken.

Several invited witnesses and remote experts were available for questioning but the committee did not act on the bill at the hearing. The sponsor said he would seek written answers to technical questions raised by committee members and returned the measure without a vote.