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Urging the Pennsylvania General Assembly to oppose legislation that will legalize predatory small-dollar lending, commonly known as payday lending, in Pennsylvania and harm the citizens of our Commonwealth.
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WHEREAS, In comparison to other towns and cities in Pennsylvania, Philadelphia faces the daunting challenge of a stressed revenue base and high concentrations of poor households in city neighborhoods; and
WHEREAS, Many of Philadelphia's low-income households live week to week, struggling to pay for the basic necessities of life and are forced to take out excessive and exorbitant payday loans to make ends meet; and
WHEREAS, Payday loans impose extraordinarily high finance charges for short-term loans, which are usually for amounts between $300 to $500, and the typical finance charge on a $300 loan is $45 for two weeks, which converts to an annual interest rate of over 300 percent; and
WHEREAS, The default risk for payday loans is low because the borrower must allow the lender to automatically withdraw money from their account when they deposit their paycheck or government benefits, and because of the high finance charges and short repayment term, most payday borrowers get caught in a cycle of repeat borrowing, taking out multiple loans each year and incur substantial finance charges that end up exceeding the total of the original sum borrowed; and
WHEREAS, Payday loans cause financial harm to borrowers, leading to overdrafts on bank accounts, defaults on other bills and even bankruptcy, and they also negatively impact the community and economy, draining nearly $1 billion a year in economic activity and increasing usage of food assistance benefits and charitable relief services; and
WHEREAS, Under Pennsylvania's long-standing usury laws, predatory payday lending is illegal, the Pennsylvania Supreme Court has upheld enforcement actions by the PA Department of Banking against online payday lenders operating illegally, an...
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