Pennsylvania Legislators Show Interest in Bringing Back Payday Loans

Pennsylvania Legislators Show Interest in Bringing Back Payday Loans 

Payday loans aren’t illegal in Pennsylvania, per se, but strict state regulations have made the industry extinct within the state. Still, residents are finding ways to meet their payday loan needs online, or by commuting to nearby states with less stringent regulations. 

Faced with a population that is being forced to go elsewhere to meet their needs, few consumer complaints, and banking data that paints a pro-payday loan portrait, state legislators are considering tweaking existing state laws to carefully bring some short-term loan lenders back to serve the citizenry.  

The consumer demand is certainly there, and the whole point of government is to serve their constituents and meet their needs. As an elected official, denying the citizens of something they are asking for without an argument for the other side is a perfect way to not be asked back for the next term. 

The pro-payday advance argument is certainly hitting home with many legislators. Proponents have pointed out that the interest costs for a short-term loan is less than overdraft fees or late fees for utility bills. They also argue that consumers who are denied for bank loans have nowhere else to turn to meet unexpected needs. 

In 2002, House Bill 2672 established the first state payday loan laws. Lenders are allowed to offer loans up to $500, with fees not exceeding $75. They cannot charge more than 20% interest on the first $300, and no more than 7.5% after that. Lenders cannot extend a loan to someone who has an outstanding balance on a previous loan.

House Bill 2191 cracks the door for payday lenders. It allows lenders to charge a 12.5% fianc charge, and an additional $5 fee. A borrower can only take out up to 25% of their monthly income, and they can still only take out one loan at a time. The bill takes some added precautions, requiring lenders to be licensed and pass criminal checks, and forcing lenders to offer payment plans at no additional costs.

So far 50 state legislators have signed onto the bill.