Advocates to Testify to Dangers of High-Interest Payday Lending
Advocates for seniors, veterans, low-income families, and faith community will testify at Senate hearing at 11 am today. They plan to testify that high-interest payday loans will trap more families in a cycle of debt.
HARRISBURG, PA (September 19, 2012) - Advocates working to keep high-interest payday lending out of Pennsylvania will testify today at 11 a.m. before a public hearing held by the Senate Banking and Insurance Committee. The hearing will be held in Hearing Room 1 of the North Office Building in the Capitol Complex. Media coverage is encouraged.
House Bill 2191 will undo Pennsylvania's strong consumer protection laws which curb high-cost lending, opening the door to payday loans that will carry annual interest rates as high as 369 percent. Payday loans are typically marketed as a quick financial fix, but data show that long-term high-cost debt is used for routine recurring expenditures, such as for rent and utilites.
The following individuals will be testifying on behalf of a large and growing coalition representing millions of Pennsylvanians who recognize that HB 2191 is not right for working families across the Commonwealth.
Col. William Harris will testify on behalf of the Pennsylvania Military Officers Association of America and the Pennsylvania War Veterans Council. He plans to say: "The Pennsylvania Military Officers Association of America and the Pennsylvania War Veterans Council are strongly opposed to HB 2191 because military veterans, especially those recently returning home, are not covered by the protections that President Bush enacted for active duty troops. Since the U.S. Department of Defense found that 300 percent APR payday loans were unsuitable for active duty soldiers - who are earning a steady income and whom we have entrusted as fully capable to defend our country - then these products legalized by HB 2191 are certainly unsuitable for recent returnees and our older veterans who are in a much more precarious mental and financial situation."
P.J. McGill, a Pennsylvania AARP Citizen Action Team volunteer, will testify: "Seniors, many of whom are on limited or fixed incomes, from Social Security, pension plans, and/or other government benefits, are ripe targets for predatory lenders. Under HB 2191, payday lenders would be able to immediately gain access to seniors' future deposits of Social Security income as a condition of the loan. It would be nearly impossible for someone on a fixed income to both meet their monthly needs and pay back a loan at a rate of 369 percent APR without incurring a new loan."
Kerry Smith of Community Legal Services will testify: "As allowed under HB 2191, the loan product itself is structured to create repetitive borrowing. Pennsylvania has reasonably regulated small loans for more than a century. HB 2191 would gut the long-standing statutes that limit annual interest rates on small loans to 6 percent for unlicensed lenders and to about 24 percent APR for lenders licensed by the Banking Department.
"Contrary to the claims of the supporters of HB 2191, the strict enforcement of our state's existing laws does not drive would-be Pennsylvania borrowers to take out payday loans online or from other sources. According to Pew Charitable Trust, in states without payday loan stores, the vast majority of would-be borrowers - 95 out of every 100 - chose not to use payday loans at all. This finding from the Pew study confirms the experiences of housing and credit counselors, consumer advocates, and social service agencies who report that illegal internet payday lending is not a significant problem in Pennsylvania.
"In those rare cases, resolution of those issues has been relatively easy and straightforward because of our existing law. HB 2191, however, would increase prevalence of the harms caused by payday loans, and make them nearly impossible to resolve. In states with laws like HB 2191, the payday loan debt trap is the norm, not the exception.
"Provisions limiting rollovers and providing a one day 'cooling off period,' and extended repayment plan do not work to stop the cycle of debt as proponents of the bill would have you believe. For example, in Florida, which has a many of the same provisions included in HB 2191 already on the books, data from the state regulator show borrowers are stuck in an average of nine loans per year, and payday lenders earn 60 percent of revenue from borrowers with 12 or more loans per year."
Rev. Dennis Ritter, Executive Director of Lutheran Congregational Services, will testify: "Our sisters and brothers in congregations and ministries in states where these loans do exist struggle against the spillover cost of payday borrowers' downward spiral of debt. As ministries which work every day to make our charitable dollars and the dollars of the families we serve stretch as far as possible, we simply will not be able to stretch our resources to cover the additional burden of high-cost 300 percent interest rate loans."