Economy
7:00 am
Wed May 23, 2012

‘Loan Shark’ House Bill Chewed Out by City Council

Pittsburgh City Council is denouncing a state House bill to allow high-interest payday loans in Pennsylvania.

Council unanimously passed a resolution against HB 2191 on Tuesday, saying the bill would "trap borrowers in debt."

Councilwoman Natalia Rudiak wrote the Will of Council. She said HB 2191 would not only increase interest rate caps from 24% to as high as 680%, but it would also codify "balloon payments."

"Which basically means that the borrower must secure the loan with a post-dated check," said Rudiak. "So, let's say their entire first paycheck would go to repay that loan, meaning that they would have to take out another loan in order to pay their other bills, be it medical bills, grocery bills, childcare bills, et cetera."

Rudiak said companies based in Texas, Colorado, and Mexico already offer questionable loans in Pennsylvania.

"We have Advance America. We have Cash America. There's one called Western Sky," said Rudiak. "They do provide these payday loans, but right now they're being hemmed in by state law. Basically, what [HB 2191] does is this frees these companies to essentially implement these predatory features."

The south Pittsburgh Councilwoman suggested sponsoring Representative Chris Ross (R-Chester), and the legislation's 38 co-sponsors had fallen victim to lobbying efforts from such companies.

"What they're saying now is that right now, a lot of folks are doing this on the internet, and these internet loans are impossible to regulate," said Rudiak. "According to these legislators, they're saying, 'Well, let's just legalize it.'"

HB 2191 was sharply rebuked by several other Council Members, including William Peduto. He said he thinks it's unfortunate that "loan sharks" have come "crawling back to our state legislature."

"In the days when you had a book that was your mortgage book, the people that offered rates that were above the banks' were criminals, and they were called loan sharks," said Peduto.

HB 2191 was "removed from the table" earlier in May, but Rep. Ross's office said it could return to the House Consumer Affairs Committee for the next legislative session.