The payday-lending industry’s buddies have learned much from today’s depictions of vampires as romantic figures.
Movie vampires have evolved from creepy Bela Lugosis to dreamy Robert Pattinsons. Similarly, payday-loan outfits have been given a cosmetic makeover in bills cleverly disguised by Harrisburg lawmakers as “consumer protection” or “micro loan” measures.
Only a few months ago, hard-working religious and community activists put a stake into the heart of fake consumer-protection legislation. But now, it lives! A new short-term-loan proposal has emerged from the dark shadows and is moving toward passage with supernatural speed.
Sen. Patrick Browne (R., Lehigh) filed a memo on May 7 that said he would sponsor the new bill. An actual copy of the legislation surfaced May 31, when it was assigned to the banking committee. That panel voted it out on June 4. If it now gets past the Appropriations Committee, a full Senate vote would be next. If it passes the Senate, the bill is likely to pass the House. The lower chamber didn’t flinch when it eagerly passed the previous payday-loan bill, so why should it now?
The new bill would allow payday lenders to charge annual interest rates exceeding 300 percent, including allowable fees, on a 14-day loan. Borrowers must give the sharks access to their bank accounts, so the lenders can easily drain them to get their payments. The bill also allows consecutive loans, which will only drive consumers deeper into debt.
Short-term payday loans are targeted at desperate consumers who are too poor to get a conventional loan. Proponents are peddling the loans as needed financial instruments that can help a family get a handle on car-repair bills or a medical emergency.
Typically, a borrower takes out a loan that must be repaid within a week or two. But repaying the loan often makes it difficult for the borrower to pay other bills. So, he takes out another short-term loan. That cyclical borrowing is what consumer advocates call a “debt trap.” Subsequent fees and interest payments can push a family into insolvency.
The state Supreme Court in 2010 upheld rules for loans made over the Internet, saying lenders must be licensed by the state and may charge no more than about 24 percent interest on loans of $25,000 or less. If the new legislation changes the legal basis for that ruling, consumers will again become prey.
It’s time to shove a stake that works into the Pennsylvania bill’s heart.
The Philadelphia Inquirer