A New Payday Loan Effort?
Over the last three years payday lenders have attempted to legalize their predatory products in Pennsylvania. Each time they have rechristened the same predatory loan products with names like “short-term loans,” “micro-loans,” and “fresh start.” Each time, payday lenders attempted to bury the high cost of the loans they seek to legalize in the fine details of the legislative language. But, each time, the proposals carried the hallmarks of predatory payday lending: triple-digit APRs, pricing to encourage flipping, loans secured by direct access to a borrower’s bank account, and no regard for a borrower’s ability to repay the loan when considering income and expenses.
On May 20, Senator Jake Corman circulated a co-sponsorship memo regarding a “90 Day Consumer Loan Program.” While the memo suggests the development of a responsible loan product, our experience with the payday lenders’ recent bills (HB 2191 in 2012 and SB 975 in 2013) encourages caution with any legislation that hints of a renewed payday loan effort. As the language of the proposed bill is not being made public at this time, LAMPa is communicating with legislators, asking them to proceed with caution on this or any other effort to change Pennsylvania’s strong consumer protections. Once that language is available (and there has been of history or keeping these details under wraps) LAMPa will analyze it to determine what course of action to take.
Where predatory payday loans are legal, borrowers are trapped high-cost, long-term debt, leading to a cascade of financial harms. Payday lending causes borrowers to fall behind on other bills,to delay medical care,to overdraft their bank accounts,and even file for bankruptcy. Payday lending also negatively impacts the community and economy, draining jobs and increasing usage of government resources, such as food stamp use. Communities with payday loan storefronts report strains on local food pantries and charitable emergency relief services. Finally, payday loans were found to undermine military readiness because of their harm to soldiers.
Pennsylvania already has among the strongest laws in the country to protect against payday loan abuses, as recognized by the U.S. Department of Defense. Pew Charitable Trusts “does not recommend law changes in the 15 states that do not have payday lending.” Pennsylvania is one of these 15 states. Our law effectively protects against illegal predatory loans, even if made online, since they are void and unenforceable. LAMPa looks forwarding to working to make sure this remains unchanged.