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So-called payday loans are not legal in Pennsylvania, but a bill passed by the state House to allow them is now getting a vigorous hearing in the Senate.
Kerry Smith, an attorney with Community Legal Services in Philadelphia, said there is no great clamoring for short-term loans in the commonwealth.
“The only people who are pushing this bill are the out-of-state payday lenders that are going to make money off of trapping people in 300 percent interest rate debt.”
But several Republican senators argue the 300 percent figure is misleading, based on a calculation as if people are borrowing money for an entire year, instead of a period of weeks or a couple months.
State Representative Chris Ross (R-Chester County), sponsor of the bill, said regulating legal short-term lending is necessary to keep people from resorting to the unregulated lenders operating outside of the state advertising on TV, in print, and online.
“It is already easy to take out a payday loan in Pennsylvania because all you have to do is pick up the telephone or go on the computer and, a couple of keystrokes, you’re in,” said Ross. “So they are widely available, they are broadly advertised.”
Ross and supporters of the legislation say it contains consumer protections that will keep people from getting locked into debt. They point to the proposed ban on rollovers, which will keep unpaid debt from being pushed onto a second loan period.
Pennsylvania Banking Secretary Glenn Moyer said provisions would keep lenders from abusing borrowers including language that any loans that do not comply with state regulations will not be enforceable or collectable.