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Article published October 10, 2012
Nix payday lending
Leslie OscheExecutive director
The United Way and its partner agencies, along with the Butler Emergency Relief Initiative, work to help people raise themselves from poverty through improved financial literacy and, in particular, the responsible use of credit. In addition, we’ve worked to bring accountability to customers receiving utility assistance, and we’ve reached a point where they are contributing almost a 1:1 match on their bills. These data are tracked through our Utility Integrated Point of Contact at the Center for Community Resources. The Pennsylvania Senate is about to set these efforts back years with an ill-considered bill — House Bill 2191 — that would legalize 369 percent APR payday lending in Pennsylvania. Payday lending, which is allowed in many states, lets people borrow against their next paycheck. Their next payday comes and the loan is due in full, leaving the borrower short of money for other bills and likely to take another payday loan to make ends meet. In Florida, a state with a law similar to the proposed Pennsylvania legislation, borrowers take an average of almost nine loans per year, with 69 percent of the proceeds spent on regular household expenses like rent, utilities and food. This cycle of repeat lending is a debt trap that Pennsylvania has wisely avoided. Payday lenders count on repeat business to be profitable. Clearly, preying on these people is profitable and a few weak consumer-friendly provisions in HB 2191 wouldn’t alter that business model. Illegal payday lending simply wasn’t a problem in Pennsylvania until out-of-state payday lenders showed up to tell us about it. Their key argument in favor of the bill is to suggest that payday loans are being made illegally over the Internet, and to people driving to Ohio or Delaware to get a loan. But that doesn’t hold up. Credit counseling agencies around the state — including agencies in Butler County — help thousands of people manage their finances every year. These agencies aren’t seeing widespread use of payday loans. Even if it were a problem, enforcement of existing laws would be a much more sensible response than opening 1,000 payday loan stores. HB 2191 passed the state House of Representatives in June, and the leaders of the Senate Banking Committee would like to move it to the floor for a full vote before the end of this legislative session. This is an opportunity for the Senate to exhibit some common sense: Payday lenders are not pushing this bill because they’re concerned about consumer protection. They want to make millions of payday loans to working Pennsylvanians. If HB 2191 passes, Gov. Tom Corbett will sign it and payday lending stores will start popping up. This would be a terrible blow to the finances of working families all over the state and would set back the efforts of our social service agencies, utilities, fuel providers, the Bar Association, credit counselors and the faith-based community. I am asking that Pennsylvania residents reach out to their state senators and let them know that Butler County supports only responsible lending practices.