[author: Aaron Kase]
Consumer advocates in Pennsylvania won a hard-fought delay on Wednesday against a pending bill in the legislature that would once again permit payday lenders to charge predatory rates and victimize the state’s poor and downtrodden residents.
Bill would raise allowable interest rates to 369 percent
Loan companies falsely claim the bill is a “consumer protection law”
Predatory lending banned in 17 states and on military bases
Army of Lobbyists
A bill that passed the Pennsylvania state house earlier this month that would raise the permissible annual percentage rate on small loans to 369 percent will be held in the state senate until the next legislative session in the fall, according to activists fighting against the bill.
Currently, Pennsylvania caps loans at 24 percent APR.
Typically, payday loans work with a consumer borrowing cash in advance of his or her next paycheck. However, the borrower often can’t pay the loan back right away, and has to take out another, then another, accumulating interest that can rapidly rise into the thousands of dollars for a debt that started at a few hundred. It takes a typical borrower 212 days to repay a loan.
So why is the state on the verge of reopening the door to predatory lenders? Lobbyists, that’s why. “There is an army of lobbyists for the payday lenders in Harrisburg,” says Kerry Smith, staff attorney at Community Legal Services of Philadelphia, part of a coalition opposing the law.
‘Screw the Poor’
The lobbyists have pushed the cockamamie claim that the payday loans would actually be a consumer protection bill, even though every consumer protection group in the state opposes it.
“Certainly there is a broad-base opposition,” Smith says. “Over 60 organizations are opposed to it. It’s a diverse coalition with veterans advocates, credit counseling groups, housing counseling.”
“If there were a truth-in-politics law, they’d have to say, ‘We’re about to pass a bill that will screw every poor person even more,’” Philadelphia Director of Consumer Affairs Lance Haver told the Philadelphia Daily News.
For years Pennsylvania has managed to keep predatory lenders at bay. The state was even praised by the Department of Defense for having one of the strongest payday loan laws in the country when former President George W. Bush passed a federal bill in 2006 that capped loans at 36 percent APR on military bases. Sixteen other states have laws that sharply limit the interest rates that lenders can charge. Find out more information about your state here.
Long Term War
Lenders have for years looked for ways around the interest rate caps. In 2010 the Pennsylvania Supreme Court ruled that Nevada-based lender Cash America could not get around the ban by selling its loans over the internet, with APRs up to 1,140 percent. Cash American, along with Axcess Financial Services, another payday lender, is among the main lobbying groups pushing for the current anti-consumer bill.
Even though internet loans are already illegal, the state lawmakers promoting the return of predatory lending claim the bill is necessary to protect residents from risky online loans. The law would also force lenders to be licensed by the state, and give loans of no more than $1,000, or a quarter of the borrower’s months income, whichever is less.
For now, an apocalypse of interest and fees on Pennsylvania’s poor has been averted.
“At least temporarily, good sense has prevailed,” Smith says. “We’ll see what happens in the fall. I’ll take our win on a battle though I think we have long term war in front of us.”