Senate committee adopts amendment to cap small-dollar loan APR at 36%; supporters and industry representatives testify

Senator Forrest Dunbar, sponsor of Senate Bill 39, told the Senate Labor and Commerce Committee on Feb. 19 that the bill would align payday lending with existing limits for other small-dollar loans by setting a 36% annual percentage rate cap for loans under $25,000 and closing a statutory carve-out that allows higher APRs for payday lenders.

Dunbar said the adopted amendment, A.alpha.1, changes the bill into the version that came out of prior work last session and reflects the negotiated approach the sponsor and advocates preferred. "This amendment changed it into that final version, that myself and the advocates prefer," Dunbar said during the hearing.

The committee adopted amendment A.alpha.1 after a motion and a brief objection for purposes of discussion; the objection was removed and the amendment was adopted by voice without a roll-call tally recorded in the transcript. The motion to adopt was made on the record as "I move amendment A.alpha.1 to Senate Bill 39." (mover recorded in the hearing transcript; no recorded roll-call vote in the transcript.)

Testimony at the hearing came from consumer advocates and industry representatives with differing emphases. Trevor Storrs of the Alaska Children’s Trust urged passage, citing research that financial strain contributes to child abuse and neglect and saying payday loans can trap families in cycles of debt. He said the trust “offers its strong support for Senate Bill 39.”

Claire Lutke, economic justice lead for the Alaska Public Interest Research Group (ALASKA PIRG), provided data and context: she said Alaska research shows the average payday loan APR was 421% (2023 data cited), that 62% of payday lending in an earlier year was online, and that borrowers in Alaska take an average of about 4.5 payday loans per year. Lutke highlighted federal protections in the Military Lending Act for active-duty service members and urged extending similar protections to veterans and other Alaskans.

Ashley Erisman of the American Fintech Council testified in support of a 36% cap, saying the fintech industry supports a framework that preserves access to small-dollar credit while protecting consumers and that certain fintech-bank partnerships can offer lower-cost alternatives.

Committee members asked questions about renewal terms, the risk that tighter state caps would shift borrowers to out-of-country online lenders, and whether banks or credit unions could fill the short-term, small-dollar credit need under a 36% cap. Dunbar said the intent is to close an Alaska-specific statutory loophole and pointed to experiences in other states where regulated short-term credit under a cap remains available locally.

The hearing produced no recorded committee vote on final passage of SB 39; committee members agreed to continue consideration after invited testimony. Senator Dunbar asked that staff provide a sectional review of the amended bill at a future hearing and noted he hopes the industry will continue to operate under the new limits while providing safer products for Alaskans.