A New Payday Bill Looms
On June 1, Senator John Yudichak (D), who has co-sponsored payday lenders’ bills in prior sessions, circulated a memorandum urging his colleagues to join him in co-sponsoring legislation that he soon will introduce to legalize a new loan product in Pennsylvania, called the “Pennsylvania Financial Services Credit Ladder.” The memo is available at this link.
BACKGROUND: It appears that the payday lenders will be using a loophole in the national Consumer Financial Protection Bureau‘s preliminary proposal for a national payday loan rule as leverage to legalize their predatory product in PA. The CFPB has released an outline of proposals that its considering to reign in predatory lending practices. The good news is that the CFPB has recognized that payday lenders should ensure that a borrower has the ability to repay the loan, taking into account the borrower’s income and expenses. That’s a strong start to protecting consumers nationwide. Unfortunately, the preliminary proposal also has some loopholes that would permit payday lenders, in states where they are authorized, to continue to make predatory, unaffordable loans. We have been concerned that the loophole would be seen as a “CFPB seal-of-approval” for loans that are not legal here in PA, and the payday lenders would tout the CFPB’s tacit “approval” of these predatory loans as they push to legalize them in our state. Groups all across the country have been urging the CFPB to eliminate the proposed loophole and ensure that lenders make loans based on a borrower’s ability to repay.
ACTION: The best way to stop predatory lending is to cap interest rates and fees on loans, like we’ve already done here in PA. The CFPB, however, doesn’t have the authority to cap interest rates nationwide. That’s why keeping our state interest rate caps in place will remain critical.
Until there is a public version of the bill, we cannot do a full analysis. But as we know from our experiences with prior bills, the co-sponsorship memos put out for the payday lenders’ bills often fail to include critical information. These bills have often garnered broad support before anyone knew what was in them. We want to make sure that doesn’t happen this time.
LAMPa advocates in targeted districts have been asked to take action. Stay turned for updates.