Secretary of Banking Says Legislature Needs to Get Tougher in Overseeing Payday Lenders

Secretary of Banking Bill Schenck told state lawmakers today that Pennsylvania is committed to protecting consumers and suggested that current laws need to be tougher in overseeing payday lenders.

“Pennsylvania needs to get tough on payday lending. Sitting around and waiting for Washington to do something about it just isn’t an option,” said Schenck. “Make no mistake, the Governor supports and would sign a bill to ban these practices in Pennsylvania.”

In testimony before the Senate Banking and Insurance Committee, which is considering proposals to limit payday lending in Pennsylvania, Schenck discussed the provisions of House Bill 1478 which, among other things, calls for clear disclosure of payday loan terms, limits the amount of money that can be borrowed, and requires payday lenders to offer extended repayment plans to consumers who need them. Schenck noted, however, that enforcement provisions must be restored before the Department of Banking will support the bill.

“This administration is committed to protecting Pennsylvania consumers,” Schenck said. “I have heard from families who have used payday loans to fix their cars or buy prescription drugs for their kids. They say payday loans are lifesavers. But I have also heard horror stories from other families who got trapped in the cycle of indebtedness that characterizes this industry.”

“Short of legislative action to eliminate payday lending practices in Pennsylvania, the General Assembly needs to make House Bill 1478 stronger,” Schenck said.

One suggestion that came out of today’s hearing was to take deferments and repayment options for deployed members of the armed forces and National Guard and extend them to their families as well. Another suggestion was to reduce fees that can be charged on payday loans, which the bill sets at $17.50 per $100 borrowed.

Several hundred payday loan outlets currently do business in the commonwealth by affiliating themselves with out-of-state banks, an arrangement that makes it difficult to apply Pennsylvania law. Two measures are being considered: one would regulate the practice and one would outlaw it entirely.