It Takes a Village to Keep Predatory Lending Out of PA
“STOP Predatory Payday Loans in PA Coalition” is a network of concerned agencies, organizations and individuals (including LAMPa) working to keep the legislature of the Commonwealth of PA from legalizing payday loans. Payday loans are small loans at greater than 300% interest. Last session, House Bill 2191 narrowly passed in the PA house last session, and despite intense lobbying by multiple out-of-state entities, fell short of securing the necessary votes in the PA Senate. They were beaten back by a small but committed group of Pennsylvania advocates including the faith community, credit counseling and housing agencies, legal aid groups and military veterans groups.
Lobbyists from the banking and finance industry have been working overtime already in 2013 trying to convince the legislature to overturn the limits that have been in place, protecting PA citizens, for over 100 years. The Commonwealth strictly regulates all small-loan lenders: unlicensed lenders may charge only 6% interest annually and lenders licensed by the Banking Department may charge higher rates of about 24% annually. Proposed legislation would legalize Internet and storefront payday lending at 300% interest rates or more – which is over 12 times the current law. Such legislation is being described as “Consumer Protection” – but would actually be big business for lenders.
The Coalition met on December 7 to plan its efforts against a Payday Lending bill that will inevitably be introduced. The House and Senate districts were divided into regions, with volunteers agreeing to coordinate local contacts with legislators. The group is attempting to set up a meeting with newly elected Attorney General Kathleen Kane, and plans to remind her of then Attorney General Corbett’s opposition to Payday Lending.
The federal government enacted a law to protect military personnel from such usurious practices. The Department of Defense wrote:
“[A] variety of laws have been enacted to authorize loans based on checks drawn on insufficient funds and costing over 300 percent APR. Many of these States that have legalized payday lending have included in their authorization statutes a variety of provisions purporting to lessen the harm of repeat borrowing that result from the design of these loans. These provisions include mandatory databases, cooling off periods, attempts to stop rollovers and back-to-back transactions, and attempts to stop borrowing from multiple lenders. Even with the addition of all these ‘consumer bells and whistles,’ these laws do not stop the debt trap.”
Due the ineffectiveness of these “bells and whistles,” Congress and President Bush enacted a common sense interest rate limit of 36% APR (annual percentage rate) to loans made to military families– a rule similar to what Pennsylvania already has in place for all families.
Despite the rhetoric of the lending industry, Payday Loans will be secured by a borrower’s post-dated check or electronic access to a bank account and have APRs beyond 300 percent. Such loans have been linked to higher chances of bankruptcy, late bills, growing overdraft fees, and closed bank accounts.
The claim of “consumer protection” won’t be enough to stop the inevitable economic harms of 300% payday loans. The last thing Pennsylvania needs is high-cost unsustainable debt.
Please join LAMPa and the STOP Predatory Payday Loans in PA Coalition in working for the financial well-being of Pennsylvanians. When a Payday Lending bill is introduced, contact Representatives and Senators and urge them to vote NO.