Pennsylvania Working with Payday Loan Industry on Fair and Reasonable Regulations

Pennsylvania Working with Payday Loan Industry on Fair and Reasonable Regulations

While many local and state governments, legislators and community groups are at odds with the payday loan industry, and have created an antagonistic relationship between the lenders, their customers and the near-sighted officials elected to protect them,  the state of Pennsylvania has taken note of this inefficient system and has instead elected to work with payday lenders to craft a set of realistic and helpful regulations to protect consumers while allowing them access to the credit products they continue to demand in record numbers. 

The proposed bill passed by a vote of 102-90 in the Pennsylvania House of Representatives and now goes to the Senate for approval. 

The legislation would prevent lenders from charging more than 12.5% in interest, plus a $5 fee. Borrowers would be limited to the lesser of 25% of their monthly income, or $1,000. Lenders would also be required to apply for a license, and would be screened and varified as part of the process. 

Critics still point out the high APR associated with such a plan, but fail to realize that an annual percentage rate is an unrealistic barometer for a 2 week loan. If payday loans were held to the 36% APR standard, the loan would generate less than $1.50 in the two weeks -- barely enough to buy a hamburger at McDonalds, much less pay utility bills, rent and employee salaries. In all 17 states that have enacted a 36% APR limit, the industry has vanished, leaving those citizens unable to obtain bank loans due to poor credit with no alternatives. Are they better off? Probably not. 

The Pennsylvania House is currently controlled by the Republicans; during the deliberations dissent came solely from the Democrat minority. The bill was sponsored by Republican Representative Chris Ross.