Philadelphia Inquirer Slams Proposed Predatory Lending Law
The Philadelphia Inquirer draws attention to a truly odious bill in the Pennsylvania Statehouse:
Dressed in the clothing of consumer protection, the bill strips away Pennsylvania’s long-held and strongly enforced protections against predatory short-term loans. Sponsored by Rep. Chris Ross (R., Chester), the legislation would drop-kick the state’s 24 percent annual-percentage-rate cap. As a result, individuals with marginal incomes, including truck drivers, nurses, and clerks, could be pushed into a cycle of debt.
It’s easy for that to happen: Lured by the availability of quick money, a borrower may take out a two-week loan and pay it back on payday, with interest and fees. A few days after payday, though, he realizes he can’t pay his bills, so he takes out another loan. Of course, he has less money to pay the new debt because he’s just paid an unconscionable premium to the payday lender.
The cycle repeats, keeping people indebted to the lenders an average of 200 days a year, according to national statistics.
Borrowers secure the payday loans with their bank accounts by either giving the lender a postdated check or, incredibly, giving the lender Internet access to bank accounts. Ross’ bill would also give payday lenders access to unemployment and Social Security checks. Talk about vulnerable people!
On a $300 loan, the legislation would allow $42.50 in interest and fees. Annualized, that’s 369 percent.
As the editorial points out, this effort puts Pennsylvania on the opposite path of other states such as Missouri where faith groups have been a key part of the coalition to put a payday-lending restriction referendum on this year’s ballot.