Article Tools

Font size
Share This

Photo: Source: Pew Research, License: N/A

Most borrowers use payday loans to cover ordinary living expenses

In a closely divided eight to six vote June 4, the Pennsylvania state Senate Banking and Insurance Committee approved Senate Bill 975 legalizing payday loans. The liberal think tank, Keystone Research Center (KRC), noted some payday loans have annual percentage rates of “upwards of 300 percent.”
KRC issued the following statement on behalf of the Coalition to Stop Predatory Payday Loans in Pennsylvania:  “Senate Bill 975 rolls back the state’s long-standing protections against predatory payday loans. Pennsylvania has been recognized by both the Pew Charitable Trusts and the U.S. Department of Defense for having among the strongest laws in the nation to keep out predatory payday lenders. A 2010 Pennsylvania Supreme Court case held that loans made in violation of existing law are illegal, even when made online.
“Senate Bill 975 would undo those protections, harming working families across the state. With this bill comes a higher likelihood of bankruptcies in Pennsylvania, and payday lenders gaining direct access to borrowers’ bank accounts. These are just some of the reasons that the bill faces opposition from a majority of Pennsylvanians.”


Pa. Senate Committee on Banking & Insurance and how they voted on SB 975:

White, Donald C., Chair    YES
Republican — Armstrong, Butler, Clearfield, Indiana and Westmoreland.
Eichelberger, John H., Jr., Vice Chair    YES
Republican — Bedford, Blair, Fulton, Huntingdon and Mifflin.
Scarnati, Joseph B., III, Ex‑Officio    YES
Republican — Cameron, Clearfield, Elk, Jefferson, Mckean, Potter, Tioga and Warren.
Browne, Patrick M.     YES
Republican — Lehigh, Monroe and Northampton.
Brubaker, Mike     YES
Republican — Chester and Lancaster.
Corman, Jake     YES
Republican — Centre, Juniata, Mifflin, Perry
and Union.
Rafferty, John C., Jr.    NO
Republican — Berks, Chester, Montgomery.
Vance, Patricia H.    NO
Republican — Cumberland and York.
Ward, Kim L.    YES
Republican — Westmoreland.
Stack, Michael, Minority Chair    NO
Democrat — Philadelphia County.
Boscola, Lisa M.    NO
Democrat — Lehigh, Monroe and Northampton.
Brewster, James R.    YES
Democrat — Allegheny and Westmoreland.
Farnese, Lawrence M., Jr.    NO
Democrat — Philadelphia County
Williams, Anthony H.    NO
Democrat — Delaware and Philadelphia.
AYES:     8
NAYS:     6


Sidebar: Are payday loans all that bad? A Federal Reserve Bank of New York report says, ‘No.’

A Federal Reserve Bank of New York report, Payday Holiday: How Households Fare after Payday Credit Bans, by Donald P. Morgan and Michael R. Strain, dated November 2007 and revised in February 2008, concluded:
“Georgians and North Carolinians do not seem better off since their states outlawed payday credit: They have bounced more checks, complained more about lenders and debt collectors, and have filed for Chapter 7 (no asset) bankruptcy at a higher rate.
“The increase in bounced checks represents a potentially huge transfer from depositors to banks and credit unions. Banning payday loans did not save Georgian households $154 million per year, as the Center for Responsible Lending projected — it cost them millions per year in returned check fees.
“The increased problems are not just “withdrawal” symptoms preceding a healthier financial life without payday credit. The problems do not appear temporary, for one, plus we find that Hawaiians (where payday loans are legal) had fewer and less chronic problems after the maximum legal “dose” of payday credit was doubled.
“While our findings contradict the debt trap/addiction hypothesis against payday lending, they are consistent with alternative hypothesis that payday credit is cheaper than the bounce “protection” that earns millions for credit unions and banks.
“Forcing households to replace costly credit with even costlier credit is bound to make them worse off.”