Philadelphia, PA – In advance of a forthcoming industry-backed bill to allow high-cost, long-term payday loans in Pennsylvania, Philadelphia City Council took the first step toward fending off their attempts by adopting a resolution, calling on members of the General Assembly to oppose any such legislation.
For over a decade, the out-of-state payday lenders have been working to bring their predatory loans into Pennsylvania by lobbying for legislation that would eviscerate state caps on interest and fees for consumer loans. This session, they are working to legalize long-term payday loans, a product they increasingly have offered in states where high-cost lending is legal in an attempt to avoid regulations targeted at their traditional two-week payday loans.
The industry claims that what they want to offer is a safe credit product for consumers. However, long-term payday loans carry the same predatory characteristics as traditional, balloon-payment payday loans, with the potential to be even more dangerous because they keep borrowers indebted in bigger loans for a longer period of time. Recognizing the harm these long-term payday loans cause to military members, the U.S. Department of Defense recently modified its regulations to apply its 36% rate cap, including fees, to long-term loans made to military members, a similar protection to what Pennsylvania has for all residents.
The resolution, driven by Councilwoman Cherelle Parker, states that the best way to protect Pennsylvania residents from abusive payday loans is to keep our existing, strong protections in place and continue to effectively enforce our state law. As a State Representative and the Chair of the Philadelphia Delegation, Councilwoman Parker was a leader in the 2012 fight to keep payday lenders out of Pennsylvania.
“We have had enough of the payday loan industry’s antics to try and deceive Pennsylvanians, pretending as though what they want to offer in the Commonwealth is a safe option for consumers,” Councilwoman Parker said. “We already have some of the safest consumer protections in the nation. If what they have on the table is safe, then they wouldn’t need to change the rules. This is nothing short of shenanigans and we won’t fall for it,” she continued.
“Considering that Philadelphia has the highest rate of poverty of any major city in the country, the Commonwealth should not pass legislation that would subject our most vulnerable citizens to the victimization of payday loans,” said Councilman Derek Green.
A June 2015 cosponsor memo from Senator John Yudichak (SD 14 – Carbon, Luzerne) states his intention to introduce legislation that would allow a new loan product in Pennsylvania, citing a forthcoming rule from the federal Consumer Financial Protection Bureau (CFPB) as a model for his proposal. While the memo claims that the legislation would create a safe lending product for consumers, a circulated draft would raise the interest rate cap to 36% and provide no maximum cap on fees. Long-term payday loans offered in states where they are legal carry costs over 200% annually. The memo also fails to mention that Pennsylvania’s existing law is stronger than any rule the CFPB can propose because the CFPB, unlike Pennsylvania, does not have the authority to set a limit on the cost of loans.
“Once again, the payday lenders are lobbying legislators in Harrisburg to weaken our state law, attempting to disguise their proposal as a consumer protection measure. Despite the rosy packaging, the core of their business model and their proposal is a debt-trap loan that would bring harm to our communities and our most vulnerable. We applaud Philadelphia City Council for sending a strong message to Harrisburg that Philadelphia does not want these predatory loans in our state,” said Kerry Smith, Senior Attorney at Community Legal Services of Philadelphia.
“We are proud of Pennsylvania’s safeguards keeping predatory loans away from our most vulnerable consumers. It’s no doubt that this latest attempt to eliminate these protections is a veiled attack on communities who have already had enough with social and financial burdens,” stated John Dodds, Executive Director of Philadelphia Unemployment Project.
A large, broad-based coalition that includes faith organizations, veterans, community development organizations, economic justice advocates, and social service agencies is speaking out against the industry’s attempts in Pennsylvania.
“Contrary to the payday lending lobby, payday loans are not a lifeline for cash-strapped consumers. They help perpetuate a two-tiered financial system of insiders and outsiders. Let’s be clear about the real issue. Being low-income or poor is a result of a shortage of money, not a lack of access to short-term credit,” said Soneyet Muhammad, Director of Education for Clarifi, a financial counseling agency.
“We’ve seen their proposals for ‘short term loans,’ ‘micro-loans,’ ‘fresh-start loans,’ and most recently a ‘financial services credit ladder.’ Although the product names keep changing, each proposal is actually a debt trap which takes advantage of people who find themselves in vulnerable financial situations,” said Joanne Sopt, a member of UUPLAN’s Economic Justice Team.
“Gutting our state’s strong cap on interest and fees to legalize high-cost, long-term installment loans will drop predatory store-fronts right into our neighborhoods, seeking to hoodwink the very neighbors we serve. These businesses would drain money from our community and force Southwest CDC to divert resources away from neighborhood progress in order to assist our clients in climbing out of that trap of debt,” said Mark Harrell, the Community Organizer for Southwest CDC (Southwest Community Development Corporation).
“Military veterans understand the harms of payday lending. That’s why military veterans’ organizations have been working so hard over the last few years to keep our existing state protections in place,” said Capt. Alicia Blessington USPHS (Ret.), of the Pennsylvania Council of Chapters, Military Officers Association of America.
“This latest attempt is another wolf in sheep’s clothing. It’s important that we expose them for what they represent and remind payday lenders that they’re not welcome in Pennsylvania. We applaud Councilwoman Parker for her leadership over the years defending Pennsylvania’s protections. We thank Councilman Derek Green for his continued enthusiastic support,” concluded Michael Roles, the Field Organizer for the Pennsylvania Public Interest Research Group (PennPIRG).
Councilwoman Cherelle L. Parker is in her first term representing the 9th Council District. Parker previously served in the Pennsylvania House of Representatives serving the 200th Legsislative District. More information at phlcouncil.com/CherelleParker