Payday Lending Update
Last week, the House approved 300% interest rate debt to come flooding into the state. The House passed a bill to legalize predatory payday loans by a slim margin. (See how your representative voted here.) Now, the decision now rests in the hands of your Senator. Call today to share your feelings on payday loans.
Payday loans are small-dollar, extremely high-interest loans, which typically carry triple-digit interest rates of 300% annually or higher. They are called payday loans because they generally must be paid back in full, with all interest and fees, on the borrower’s next payday.
While payday lenders market these loans as “short-term” or “emergency” loans, they really are just a debt trap. Because the loans are so expensive, secured by access to the borrower’s checking account, and due in full just two short weeks later, most people who take out a payday loan are unable to pay it back and still have enough money to pay for their regular expenses. Borrowers then have to either renew the loan or take out another payday loan shortly thereafter just to make ends meet. This begins the debt trap cycle.
According to a comprehensive report on payday lending conducted by the Department of Defense, "The debt trap is the rule not the exception: the average borrower pays back $864 for a $339 loan.” Payday loans were so harmful to the finances and military readiness of our service members that Congress established a 36% APR rate cap for military families
Fortunately for Pennsylvania residents, payday lending at triple-digit interest rates has long been illegal under Pennsylvania law. Our state strictly regulates small-loan lenders: unlicensed lenders may charge only 6% interest annually and lenders licensed by the Banking Department may charge higher rates of about 24% annually.
Call today to share your feelings on payday loans.