To the Editor:
It is time to face the fact that while payday lending is illegal in Pennsylvania, it is widely available to Pennsylvanians via the Internet. The Pennsylvania Department of Banking is overmatched trying to stop the payday lenders who locate off-shore, use the sovereignty of Native American tribes or shifting post office business addressees to evade prosecution.
Pennsylvanians give in to these dangerous, uncontrolled loans because there is no safe or less expensive alternative when faced with an emergency – such as an unexpected car repair or medical bill. It is clear that Pennsylvania citizens need a safer, less costly way to address these emergencies.
Financial transactions with unregulated businesses over the Internet carry significant risks. Abusive collection practices that encourage borrowers to rollover debt into growing unpaid balances and outright fraud are more common than one might think. That is why the Pennsylvania Department of Banking has joined me and Senator Pat Browne in developing protections for our citizens to help keep an emergency from becoming a crisis.
House Bill 2191, which I am sponsoring, contains a number of crucial consumer protections that do not exist now, and would require payday lenders to be licensed and heavily regulated. The legislation limits borrowing to 25 percent of a person’s gross pay check, eliminates rollover loans, and provides for credit counseling and extended payment plans at no additional charge. Borrowers are charged a one-time interest fee of 12.5 percent on the principle borrowed, and an additional $5 fee to cover the cost of program monitoring and administration. The loans are designed to be paid off in one pay period, and, if necessary, may be extended for four additional pay periods at no additional costs.
Without these protections, Pennsylvanians may be subjected to an endless cycle of fees, interest and penalties from which the borrower may never be able to dig out.
With my legislation, borrowers will typically see their costs slashed in half, and strict regulation will cut into the profits of abusive Internet lenders, effectively driving them out of Pennsylvania. Of the 34 other states that license this form of short-term lending, Pennsylvania’s law would be among the most protective.
Rep. Chris Ross