UPDATE: House Bill 2191 was not voted upon as expected on Tuesday.
The Pennsylvania House will vote today on one of the most surprisingly controversial bills of the session, a plan to legalize predatory payday lending in Pennsylvania. House Bill 2191, sponsored by Rep. Chris Ross (R-Chester County), will allow payday loans to carry rates of more than 300% annually – more than 12 times the current legal limit.
UPDATE: House Bill 2191 was not voted upon as expected on Tuesday.
The Pennsylvania House will vote today on one of the most surprisingly controversial bills of the session, a plan to legalize predatory payday lending in Pennsylvania. House Bill 2191, sponsored by Rep. Chris Ross (R-Chester County), will allow payday loans to carry rates of more than 300% annually – more than 12 times the current legal limit.
Introduced in the House in mid-March, the bill is moving at lightening speed. Perhaps it is moving quickly because opposition from around the state is quickly mounting. Groups such as the Pennsylvania Council of Chapters of the Military Officers Association, Habitat for Humanity, AARP, credit counseling agencies, women’s advocacy groups, the AFL-CIO, and a long growing list of others are all actively opposing to the bill. As of today, 24 co-sponsors from both parties have withdrawn their support of HB 2191.
Yesterday, the House debated and voted on amendments. Although several amendments were proposed to address consumers’ concerns about the bill, none of them were adopted.
The biggest concern is that legalizing predatory payday lending will create a long-term cycle of debt for many borrowers. In states with laws similar to HB 2191, the typical borrower is indebted for more than 200 days a year and 60% of payday loan revenue is generated by borrowers with 12 or more loans a year. In a 2006 study, the U.S. Department of Defense found that in states with provisions such as HB 2191, “the debt trap is the norm, not the exception.”
Amendments specifically designed to address the problem of long-term indebtedness failed largely along party lines. One amendment, sponsored by Rep. Michael Sturla (D-Lancaster) would have lowered the permissible charges from 300% to 36% annually, the same rate enacted by former President George W. Bush for members of the military. Rep. Thomas Murt (R-Montgomery) had an amendment to lower the rates to 36% annually, ban access to a borrower’s bank account as a condition of the loan, and provide a minimum loan term of 90 days. These provisions are also aligned with those enacted by President Bush for the military. Rep. Murt’s amendment was dismissed on a procedural point of order and never debated on the floor.
Rep. Joseph Preston (D-Allegheny) and Sturla proposed amendments that would have limited the number of loans to six per year, a standard similar to what is in place for state-chartered banks for these types of loan products. Rep. Bryan Barbin (D-Cambria), a sponsor of the bill, spoke on the floor in support of the amendment, noting that HB 2191’s key problem is that it does not effectively curb the long-term indebtedness caused by payday loans.
Additionally, the House rejected amendments, largely along party lines, to lower annual interest rates from 300% to 99%, to prohibit payday lenders from locating in health care facilities, to allow local municipalities to enact local land use laws related to payday lenders, and to provide disclosures in both English and Spanish.
On the issue of prohibiting payday lenders from locating in health care facilities, Rep. Ross said that paying for medical care may be the exact time when someone needs a payday loan. Consumer advocates disagree: there is never a right time to charge 369% annual interest on a $300 loan as HB 2191 would allow.