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Bill would legalize payday lending in Pa., labeled predatory by critics

Published: Saturday, Feb. 22, 2014, 9:00 p.m.

ACE Cash Express is the nation’s second largest payday lender, but customers who want a financial lifeline until their next paycheck won’t get help in any of its 19 Pittsburgh-area stores.

Payday loans are illegal in Pennsylvania, and that has limited Ace to cashing checks, selling money orders and processing bill payments for its customers, among other services.

But the restrictions on a potential cash-cow for a business such as ACE could change because of renewed efforts by the industry to legalize payday lending in Pennsylvania. It mirrors a push elsewhere in the country to allow loans that critics say take advantage of needy consumers.

A bill remains in the state Senate that could legalize payday loans in Pennsylvania that critics say would allow annual interest rates as high as 300 percent. The bill follows a similar one that passed the state House in 2012.

“We’ve seen nationally since 2005 that payday lenders have continued their push to bring back these loans,” said Diane Standaert, senior legislative counsel at the Center for Responsible Lending, a nonprofit in Durham, N.C., that opposes payday loans. “There have been a lot of efforts in the states, and they are continually rejected.”

Pennsylvania has an anti-payday lending law and a 2010 state Supreme Court decision backed it up. The law caps interest rates on short-term loans at 24 percent.

Critics say the high-rate lending practices most often gouge lower-income wage earners with double- or even triple-digit interest rates and keep consumers in debt. Legalizing payday lending is opposed by veterans, seniors and faith groups in the state.

The move to make these high-interest loans legal happens as some payday lenders have circumvented state prohibitions by using the Internet to solicit borrowers — an issue that is drawing the attention of regulators and legislators.

State Rep. Chris Ross, R-Kennett Square, a supporter of efforts to legalize payday loans in Pennsylvania, points to the flood of solicitations by online payday lenders in television ads and on the Internet as a reason why lawmakers remove the ban in Pennsylvania. Legalizing the business, he says, would allow state oversight and provide better protections for consumers.

“I believe there is a need for a properly structured, short-term lending in Pennsylvania,” said Ross, who sponsored two bills to legalize and regulate loans that passed the state House in 2012 and 2004, but not the Senate. “We’ve got the Internet, for which there is no effective means of regulation to protect consumers.”

Ed Novak, spokesman for the state Department of Banking and Insurance, said tracking down Internet lenders is “like trying to nail Jell-O to the wall, but when we do find it, we take all measures we can to protect consumers.” Even so, Novak said the department is not seeing much activity. “We made sure some of the companies got the message,” he said.

Payday lenders that charged high rates left the state in 2006 after the Federal Deposit Insurance Corp. issued strict rules for banks involved in the practice. Until then several hundred payday outlets operated in the state by affiliating themselves with out-of-state banks — a loophole that allowed them to circumvent state laws that prohibited such loans.

Federal regulators forced the banks to end the partnerships with payday lenders. In 2010, the state Supreme Court backed it up, holding that loans made in violation of existing law are illegal, even when made online.

Some companies that provided payday loans are still here. Nearly 100 offices are licensed to provide cash access services such as payroll and other check cashing, money orders, bill payment and debit cards funded by paychecks, government benefits or tax refunds — all for a fee.

ACE Cash Express is the largest in the Pittsburgh region that provides those services. It has 1,600 offices in 35 states and the District of Columbia nationwide, and still does payday lending in 31 states. Advance American, the largest payday lender, does not operate in this region.

ACE is not involved in efforts to legalize payday lending, but it did support the failed legislation in 2012, said Eric C. Norrington, spokesman at the company’s headquarters in Irving, Texas.

“We asked our customers to send letters if they were interested in getting access to short-term credit, Norrington said. “We thought there was a possibility it could pass, and it would be good if legislators heard from their constituents.”

Tim Hernandez, 23, of Dormont, a Starbucks barista, Downtown, said he cashes all of his paychecks in ACE, paying a 3 percent fee. Hernandez said he wouldn’t be interested in a payday loan like ACE offered here in the past. “The problem with that is you can end up owing money for a long time.”

Pennsylvania lawmakers are not the only ones looking a legalizing these loans. In 2008, payday loan advocates placed initiatives on ballots in Ohio and Arizona asking voters to approve the products, Standaert said. “But the message was clear in both states, voters overwhelmingly said no.”

The current legislation to legalize payday loans in Pennsylvania was passed by the Senate Banking and Insurance Committee in June by an 8-6 vote. It rolls back the state’s longstanding protections against predatory payday loans, according to the Coalition to Stop Predatory Payday Loans in Pennsylvania.

“Pennsylvania has been recognized by both the Pew Charitable Trusts and the Department of Defense for having among the strongest laws in the nation to keep out predatory payday lenders,” according to the coalition.

The bill’s sponsor, Sen. Pat Browne, R-Lehigh Valley, could not be reached for comment.

Ross’ bill in the last legislative session passed the House by a 102-90 vote in June 2012, but saw no action in the Senate. Ross says the availability of Internet loans is the reason a bill regulating them should be adopted.

“I got my bill through twice, so now it’s the Senate’s turn,” Ross said.

Opposition group Stop Predatory Payday Loans in Pennsylvania says on its website that more than 100 groups as members oppose the bill. SB 975 allows a total of $38.22 in fees on a $300, 14-day payday loan, which is equal to 332 percent annual percentage rate, the group says.

Ross contends that level of fees is similar to fees on overdue credit card and utility bill payments.

“If there’s going to be some kind of short-term lending, it should be consistent with those fees,” he said. “There should be an alternative for someone who is tight for money.”

John D. Oravecz is a staff writer for Trib Total Media.

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[…]

Missouri lawmakers considering payday loan changes : News …

Missouri lawmakers are considering changes to payday loans. &nbsp/&nbspFILE

JEFFERSON CITY, MO. (AP) — Missouri lawmakers are considering an overhaul of the state’s payday loan industry that would give borrowers more time to pay back a loan.

The legislation passed by the Missouri Senate last week also would stop borrowers from renewing a loan and would remove a cap on the amount of fees and interest lenders can charge.

Under current law, payday loans can be up to $500 and last from 14 to 31 days. Loans can also be renewed up to six times.

Sponsoring Rep. Mike Cunningham, or Rogersville, says the cap is not necessary since loans can’t be renewed, and that market forces would set the interest rates. The measure’s opponents said the bill was a step in the right direction, but doesn’t go far enough.

(Copyright ©2014 by The Associated Press. All Rights Reserved.)

[…]

Fight in Texas Over Payday Loans, From Capitol to Campaign Trail

The payday lending controversy that exploded in the governor’s race in recent weeks highlights the state’s lack of regulation and the challenge that lawmakers have faced with an issue that has been as contentious at the Capitol as it is on the campaign trail.

Last year, a major legislative effort to impose state regulations on lenders failed, and since then, Houston has joined Austin, Dallas, El Paso and San Antonio in passing a city ordinance to limit the loans. Now, the issue of so-called predatory lending is flaring in the gubernatorial race amid calls for the resignation of Gov. Rick Perry‘s appointed head of the governing board of the agency charged with regulating the credit industry and educating consumers, who is also an executive for one of the lenders.

In Texas, where payday and auto-title lending is a $4-billion-a-year industry with some 3,500 businesses, there are no limits on fees or loan sizes. Supporters of the industry say lenders offer a needed service to consumers who have few options for short-term loans. Critics say the businesses prey on struggling Texans by charging high fees and trapping borrowers in a cycle of debt.

“You’ve got these people doing stuff in Texas that they wouldn’t dream of doing anywhere else in the country,” said state Sen. Rodney Ellis, D-Houston. “It is truly the wild, wild west.”

Texans get larger loans and pay higher fees than consumers in the nation as a whole, according to the Center for Public Policy Priorities, a liberal think tank that has pushed for state reforms. Texans spent $1.2 billion in payday and auto-title fees in 2012, and 35,000 cars in the state were repossessed.

Texas was one of 27 states that had payday lending regulations that the Pew Charitable Trusts characterized as permissive in 2013. Fifteen states had no payday loan storefronts, and nine others had stores but also had strict requirements.

Some argue, though, that less regulation in Texas is better. Bill Peacock, vice president of research at the Texas Public Policy Foundation, a conservative think tank, said Texas has “one of the most competitive payday industries in the country.”

“So-called consumer advocates often complain that consumers are getting a bad deal, but consumers are voluntarily entering into these arrangements because they need access to capital,” said Peacock, who opposes city ordinances and state legislation that increase regulation of the industry.

Payday lending became an issue in the governor’s race when the leading Democratic candidate, state Sen. Wendy Davis, D-Fort Worth, called for the resignation of William White, chairman of the Finance Commission of Texas, following comments he made to the El Paso Times in December. White, a vice president of payday lender Cash America, told that newspaper that nobody forces anyone into loans and that “people are responsible for their decisions.” The campaign of Republican gubernatorial front-runner Greg Abbott has pointed out that Davis voted to confirm White in 2011.

Davis has also drawn attention to a 2006 letter written by Abbott, the state’s attorney general, that she said created a loophole for payday lenders when it said there is no limit to fees that may be charged by lenders operating as credit service organizations. Abbott’s campaign has said Davis’ loophole claim is false.

In the Senate, Davis has called for more state regulation of payday lending. Abbott campaign spokesman Matt Hirsch said Abbott would be “open to any and all reforms that will make Texas better.”

During the 2013 legislative session, lenders joined consumer advocates in working with lawmakers to craft legislation to create uniform regulations for payday lenders across the state. But there were sharp disagreements over the details of those regulations, and on the Senate floor, Davis and others added amendments to the bill that its author, Sen. John Carona, R-Dallas, said left it with little hope of passage. Since its failure, Houston, the state’s largest city, became the latest to adopt its own rules for payday lenders.

Houston’s ordinance, which is similar to those passed in other Texas cities, limits payday loans to 20 percent of the borrower’s gross monthly income. It limits loans to no more than four installments or three renewals and requires that the proceeds from each installment or renewal reduce the loan principal by 25 percent.

Ellis said passing the ordinance was a “big coup” over industry opposition. State Sen. Sylvia Garcia, D-Houston, said it would protect families and foreshadowed future state-level action.

“For too long, the working families of Houston have been preyed upon by payday lenders as they tried to survive from month to month,” Garcia said in a statement when the ordinance passed in December with the support of a coalition including religious leaders and AARP.

But the ordinances in Houston and other cities might be unenforceable or invalidated by courts, said Carona, chairman of the Senate Committee on Business and Commerce.

Carona said the legislation he proposed last year would have saved Texas consumers millions of dollars in fees, protecting them “from the cycle of debt while preserving their access to credit and the basic fundamentals that support our free-market economy.” The proposal would have pegged the maximum permissible loan a lender could offer to a borrower’s monthly income, limited the number of financial products lenders could offer and capped the number of times an indebted borrower could refinance a loan.

After the failure of the state legislation, which would have pre-empted local ordinances, Houston Mayor Annise Parker moved forward with her proposal.

Rob Norcross, a spokesman for the Consumer Service Alliance of Texas, said the trade association or its members “reluctantly” expect to sue Houston and El Paso over the cities’ ordinances, as they have done in Austin, Dallas, San Antonio and Denton.

The Dallas ordinance isn’t working, Norcross said. More than 75 payday lending stores have closed in the past two years, resulting in the loss of 200 jobs, he said. The ordinance is forcing consumers to drive to a neighboring city for loans or to bounce checks because they can’t get the type of loan they need in Dallas, he said.

“Unfortunately, we’re playing political games with people’s pocketbooks,” Norcross said. “If what we’ve seen in Dallas in the last two years is statewide, that would be a significant problem for the viability of the industry but, more importantly, a significant problem to access credit for Texas borrowers who, in a lot of instances, don’t have any place else.”

Norcross said much of the criticism of the industry results from people not understanding the numbers, such as how annual percentage rates work for small, short-term loans. An interest rate of 400 percent may sound high to people until they learn that could mean that someone borrowed $100 and had to pay back $117, he said.

While the alliance has concerns about city ordinances, it has always been in favor of a statewide regulatory framework over city ordinances, Norcross said.

“No, they don’t want statewide regulation,” Ellis said of the industry. “What they want is a statewide card to keep abusing Texas families.”

While legislation failed to pass in 2013, lawmakers did pass measures in 2011 requiring payday and auto-title lenders to be licensed by the state and to post a schedule of fees in a visible place. Consumer advocates said those laws didn’t go far enough.

Don Baylor Jr., a senior policy analyst at the Center for Public Policy Priorities, said he is pessimistic about chances that the Legislature will pass statewide reforms in 2015, in part because cities with ordinances don’t want to lose local control.

Carona said in an email that he would continue to work toward reform but that it was an uphill battle.

“Given the political environment at the Capitol, I am deeply concerned that we will have an even tougher time passing significant reforms during the next legislative session,” Carona wrote.

Additional reporting by Jay Root.

[…]

Service Members Left Vulnerable to Payday Loans

The Military Lending Act was enacted nearly seven years ago, but some say it has gaps that leave hundreds of thousands of U.S. service members open to potentially predatory loans. Congress passed the law to shield service members from loans with double-digit interest rates that can get borrowers deep into debt. Critics, however, say the law has not kept up with high-interest lenders that operate either online or near bases.

Navy Petty Officer First Class Vernaye Kelly, for example, took out her first payday loan more than 10 years ago to bankroll moving expenses; but this summer, she had to take out a couple more to cover existing payments.

The Military Lending Act has an interest rate cap of 36 percent for military members; but the restriction does not cover short-term loans for more than $2,000, loans that last for more than 91 days, or auto title loans with terms longer than 181 days. Such loans can force service members into foreclosure and put their jobs at risk, since the military considers high personal indebtedness a threat to national security. “The law did wonders for the products that it covered, but there are simply many products that it doesn’t cover,” according to Holly K. Petraeus, assistant director for service member affairs at the Consumer Financial Protection Bureau. Many are encouraging Washington to act. The Senate Commerce Committee recently held a hearing on abusive military lending, and the Defense Department is soliciting public feedback on whether the protections of the act should embrace other types of loans.

[…]

Pennsylvania Legalized Online and Offline Payday Loans Last June …

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”lifted the ban last June 2012?

The state of Pennsylvania, one of the states that prohibit all kind of payday loans whether online or storefronts lifted the ban last June 2012, so residents looking for a short-term loan can apply for a loan with peace of mind once the senate approves the bill.

The ban against payday loans is the result of protest by various sectors that oppose the exorbitant fees that a lender charges their clients. However, after 2 years of prohibiting payday loans Pennsylvania once again allow lenders to provide their services to residents in need of financial solution fast.

The HB 2191 is a bill that lifts the restriction against payday loans that took effect sometime in 2010, and now made the loans accessible to all residents. By the way, the bill protects borrowers and so there is no reason to be afraid of payday loans because these types of loans can help salaried individual in need of cash.

The HB 2191 has restriction, which all borrowers must know before they apply so they can understand the loan process even more. Once the senate approved the bill, residents can enjoy borrowing from any payday lenders they want without worries, since they have protection against fraudulent act.

At present, the HB 2101 most passed final reading before payday loans become completely available to residents. Payday lenders can operate legally, when approved by the Senate and until such time, all types of payday loans are still prohibited.

Keep in mind that payday loans online are for everyone, even those residing in the state where there is a ban on short term, unsecured loans. When a resident of any of the 13 states, just visit a payday lender online to borrow money when you need one and still enjoy protection and simplified process, as payday lenders online operate from states that allow payday loans.

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Payday-loan measure advances in Senate | Local News | The …

Originally published June 9, 2013 at 7:37 PM | Page modified June 9, 2013 at 10:13 PM

With only a few days left in the special legislative session, a controversial proposal backed by Seattle-based payday lender Moneytree advanced another step. It was one of five policy bills moved by the Senate Rules Committee along with the Senate budget.

Critics of Senate Bill 5312 are crying foul, saying the proposal is an end-around previous payday-lending legislation that reduced predatory lending practices and that it shouldn’t be part of budget negotiations.

The bill would allow payday lenders to make a new type of loan of up to $1,500 with effective interest rates that could top 200 percent. The installment loans would have repayment periods from six months to 18 months.

Currently, payday lenders can lend up to $700, and those loans have to be repaid on the borrower’s next payday.

Sen. Sharon Nelson, D-Maury Island, has been one of the most vocal opponents of the bill since it was introduced in January. She said she disagrees with the claim that it is a necessary jobs bill.

“That’s just not the case,” Nelson said.

Nelson said the “harmful effects of predatory lending” would offset any jobs that would result from the legislation.

“Right now, all we should be dealing with is the budget of the state of Washington,” she said.

Jim Richards with Statewide Poverty Action Network echoed Nelson’s concerns.

“Apparently allowing one company to increase its predatory lending that preys on the working class and on the poor is more important than passing a state budget,” Richards said.

Sen. Steve Hobbs, D-Lake Stevens, the prime sponsor of Senate Bill 5312, said it was “an attempt to get rid of payday lending and replace it with something better.”

“It would be something of a compromise between payday lending and traditional bank loans.”

“I’ve never liked the payday industry,” Hobbs added.

He said he has two amendments he would like to see added to the bill.

He said one would prohibit military personnel from taking out the loans — something the Department of Defense has insisted on since the bill was first introduced. Hobbs said his other amendment would reduce some of the fees associated with the proposed loans.

He also said he didn’t think he would be able to vote for the bill if at least one of the amendments weren’t adopted — a decision that he acknowledged might sound surprising given he’s the prime sponsor.

Republicans control the Senate with the help of two Democrats, known as the Majority Coalition Caucus.

Hobbs said he’s not sure why the Majority Coalition Caucus is pushing the bill so hard. He said he’d prefer to see his bills related to renewable energy or aircraft excise taxes taken up instead.

“But it’s not my decision,” Hobbs said.

The other policy bills moved out of the Senate Rules Committee were: a bill relating to workers-compensation settlements; one that would cap non-education spending, a proposal regarding toxic-cleanup projects; and a bill that would give school principals veto power over which teachers are assigned to their schools.

[…]

Tesla Is First Green Tech Company to Pay Back Its Department of Energy Loan

For two days John McCain and Ted Cruz have been fighting on the Senate floor over the rules for negotiating a budget, but, like so many fights, it’s also about so much more. Cruz is being annoying about the budget, but worse, he just doesn’t get the Senate.

[…]

Pay day lending bill hopes for revival | Trail Blazers Blog

Image carona1-213x300.jpg

John Carona

Key lawmakers, with time running out in the session, are pushing for a compromise bill that would put some limits on pay day loans, which have rates that can balloon to 1,000 percent annually.

The latest proposal reverts to what Sen. John Carona, R-Dallas, proposed last month on the Senate floor, before the bill was loaded with pro-consumer amendments aimed at clipping the wings of the lending industry.

Texas is the only state in the nation that allows short-term lending that puts no restrictions on interest rates, rollovers, fees and term limits.

The industry has grown into a multi-billion business in Texas and has become the only loan outlet for many low income Texans. The lenders point out most customers repay the loans in a timely way and are repeat customers.

The companies have also spent millions for lobbyists and in campaign donations, giving them formidable clout in the Legislature, lawmakers said.

But in committee testimony, customers explained how a $200 loan could mushroom into thousands owed in a very short time, and how it is almost impossible to climb out of the debt cycle. In Texas last year, for example, 35,000 cars were repossessed by car title loan companies.

Mike Villareal

Negotiations between the lenders and lawmakers have continued and Tuesday, Carona said they are close to moving a bill forward.

“Conservatively, it will save consumers $200 million a year or more,” Carona said.

“While it’s not a perfect product – particularly given the overall interest rates and other charges of these products – it’s the very best bill we could hope to advance this session,” he said.

The bill as tentatively drawn up would limit any person to one payday and one auto title loan at a time. The size of the loans would be limited by a customer’s monthly income. The loan could only be renewed four times.

In exchange, the state would hold in abeyance and place a moratorium on city ordinances seeking to control payday storefronts.

Don Baylor of the progressive think-tank Center for Public Policy Priorities said consumer groups are largely in support of the proposed bill.

City ordinances, even with their greater restrictions than the proposed state law, are limited because the loan companies are moving beyond city boundaries, Baylor said.

“So much of this business is moving off-shore, out-of-state and on-line. That’s a big victory for us. We’re able to say these laws apply to you,” Baylor said.

Carona said the bill is not perfect, but is better than what is happening now.

“Any progress on an issue as contentious as this one…should be one that’s embraced,” Carona said.

A press conference to promote the bill is scheduled Wednesday by Carona, the Republican chairman of the Senate Business and Commerce Committee, and Rep. Mike Villareal, the Democratic chairman of the House Investment and Financial Services Committee.

[…]

Senate passes tough payday loan bill, making passage doubtful …

Image 0423paydaylending.jpg

The Texas Senate passed a payday lending regulation bill authored by Dallas Republican John Carona, but amendments to the original bill make it unlikely to pass in the House. (File 2010/Staff Photo)

On rare occasions, a bill becomes a runaway train.

State Sen. John Carona (R-Dallas)

That’s what happened on Sen. John Carona’s bill limiting the payday loan industry that has sprouted in the unregulated soil of Texas. More than 3,500 storefronts have mushroomed — more than the state has McDonald’s and Whataburgers, according to Sen. Wendy Davis, D-Fort Worth.

Payday lenders give loans to low-income and fixed-income residents with little or no credit. It’s a risky business. But through loopholes in state law, the lenders have managed to pile up fees, rollovers and interest rates that can amount to 1,000 percent annually.

Davis has worked for years to cap and limit payday lenders. Carona wants to regulate them, but with less drastic measures.

He also was wary of how politically powerful the billion-dollar industry has become. He worked out a carefully balanced bill — it took small steps toward limiting the loans to a percentage of the borrower’s income. It wasn’t the best, he said, but it could pass the Legislature and the industry and its small army of lobbyists wouldn’t try and kill it.

State Sen. Wendy Davis (D-Fort Worth)

But then the train started moving out of the station. Democrats like Davis started piling on amendments. The bill gained muscle. It put on stringent interest rates (36 percent) — low enough, said Davis, to probably kill the industry.

And thus doom the bill. It passed the Senate 26-4, but the House is a different train station.

Recognizing the bill had gotten away from him, Carona told his colleagues, with a defeatist comic flare, to go ahead and work their will: “I just want to go home and feed my cat.”

This entry was posted in Legislature 2013 and tagged , , by Christy Hoppe. Bookmark the permalink. […]

PAYDAY LENDING: Roth, Hueso swings vote in Wednesday … – blog

Image payday.jpg


PAYDAY LENDING: Roth, Hueso swings vote in Wednesday hearing

Posted on | April 17, 2013 | Comments

A pair of senators representing parts of Riverside County could be swing votes on legislation intended to restrict the use of high-interest payday loans.

Supporters of the measure, SB 515, have lobbied state senators Richard Roth, D-Riverside, and Ben Hueso, D-San Diego, leading up to Wednesday’s hearing of the Senate Banking and Financial Institutions Committee. Hueso’s district includes part of the Coachella Valley.

Deferred-deposit loans typically involve a customer writing a postdated check that includes the fee and principal. They receive cash in return.

The legislation would limit the number of payday loans to any one borrower in a year. It also would require lenders to review borrowers’ ability to pay off their loans and to let borrowers pay off the loans with an installment plan, among other provisions.

Supporters of the bill, including the Oakland-based Center for Responsible Lending, say the measure would make the loans safer for consumers and help prevent a “payday debt trap” of repeated loans.

Opponents of the bill, including the Greater Riverside Hispanic Chamber of Commerce, say the rules would would ruin the industry and take away a source of credit used by millions of customers. It would drive people who need money to unregulated online sites, critics claim.

By: Jim Miller

Category:Cal Senate

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Jim Miller

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Political Empire Blog: PE Politics Team
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