A bill in the Pennsylvania Senate, similar to one that passed the state House in 2012, aims to legalize payday loans there. Currently, Pennsylvania has an anti-payday lending law in place that caps interest on short-term loans at 24 percent and that is supported by a 2010 state Supreme Court decision.
The state Senate Banking and Insurance Committee in June voted 8-6 to pass the current proposal to legalize the product. It would roll back the state's protections against predatory payday loans, according to the Coalition to Stop Predatory Payday Loans in Pennsylvania. The group says SB 975 allows a total of $38.22 in fees on a $300, 14-day payday advance -- the equivalent of a 332 percent annual percentage rate.
“We've seen nationally since 2005 that payday lenders have continued their push to bring back these loans,” said Diane Standaert, senior legislative counsel at the Center for Responsible Lending. “There have been a lot of efforts in the states, and they are continually rejected.”
Payday lender critics say they often gouge lower-income wage earners with double- or even triple-digit interest rates and keep consumers trapped in debt. Efforts to re-legalize these high-interest loans comes as some payday lenders have avoided state controls by offering loans over the Internet. Rep. Chris Ross (R-Kennett Square) supports efforts to legalize payday loans in Pennsylvania, saying the move would place the lenders under state oversight and provide better consumer protections.
Payday lenders that charged high rates left Pennsylvania in 2006 after the Federal Deposit Insurance Corp. issued strict rules for banks involved in payday lending and federal regulators forced the banks to end partnerships with payday lenders. In 2010, the Pennsylvania Supreme Court ruled that loans made in violation of existing law are illegal, even when made online. Payday loan advocates placed initiatives on ballots in Ohio and Arizona in 2008 to approve the products, but Standaert says that voters overwhelmingly voted "no" in both places.