Thursday, June 09, 2016 9:46:17 PM
Payday loan rules could be trouble for Pennsylvania
.. shtsqsh, the obvious answer to yours is, if it were that simple the situation would have been fixed a long time ago .. you have a penchant
for seeing simple solutions where, if one takes all participants and needs into consideration, there obviously isn't one .. anyway, another ..
Proposed federal regulations on payday lenders are weaker than regulations already in place in Pennsylvania. (FILE PHOTO / THE MORNING CALL)
Paul MuschickPaul MuschickContact ReporterThe Watchdog
June 8, 2016, 8:46 PM
[f & t share] Could proposed payday loan regulations allow lenders to open up shop in Pennsylvania?
A national plan to protect struggling families from high-interest payday loans that can trap them in debt sounds good, but it could be bad for Pennsylvania.
The state already has strong protections through a law that caps interest rates on small loans at about 24 percent. That's kept payday loan stores out of the state because loans aren't profitable enough here.
Federal regulations proposed last week by the Consumer Financial Protection Bureau .. http://www.mcall.com/topic/business/u.s.-consumer-financial-protection-bureau-ORGOV00000233-topic.html .. are weaker. Those rules wouldn't preempt the state law, but consumer advocates fear they could undermine it by prompting legislators to loosen the state law to bring it in line with the national standard.
One state lawmaker already is citing the feds' plan as he seeks to legalize loans at interest rates up to 36 percent, possibly with fees on top of that.
Without the strong state law, Pennsylvania residents would pay an estimated $489 million annually in fees for payday loans and vehicle title loans, according to a study released last week by the Center for Responsible Lending.
Payday loans usually are two-week loans due on the borrower's next payday. They carry high interest and fees, often triple digits when calculated as an annual percentage interest rate. Some borrowers can't afford to repay the loan when it's due, so they roll it over or take out a new loan, creating a cycle of debt .. http://bit.ly/VczTrh .
Title loans .. http://bit.ly/1D2N4uG .. are just as dangerous. Borrowers use their vehicles as collateral, and often face repossession .. http://bit.ly/1Q9lm4D .
The proposed federal regulations wouldn't set limits on interest rates in all cases, but would require most loans to be underwritten to determine if the borrower can afford to repay them. That's something that doesn't typically happen now. The proposal also would limit how many loans a borrower could take in a short period of time.
"By putting in place mainstream, commonsense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail," said Richard Cordray, director of the Consumer Financial Protection Bureau.
What concerns consumer advocates in Pennsylvania is that the proposed regulations would allow some small loans to be made without extensive underwriting, and at interest rates higher than what is permitted here now.
"Any exception risks sending the message that the CFPB has sanctioned a whole category of high-cost, predatory loans as desirable and safe, when in fact they are harmful and dangerous to borrowers," Kerry Smith, senior staff attorney at Community Legal Services in Philadelphia, testified at a hearing in Kansas City last week.
Full underwriting wouldn't be required for short-term loans of up to $500, and for loans of up to two years if the total cost to the borrower does not exceed 36 percent, excluding a "reasonable" origination fee. The Defense Department already caps the cost of those types of loans at that rate for active-duty military service members.
Bill Harris .. http://www.mcall.com/topic/politics-government/bill-harris-PEPLT002730-topic.html .. of Bethlehem, president of the Pennsylvania chapter of the Military Officers Association of America, said if the proposed national rule can't be strengthened, the state would be better off without it.
"Just don't do anything," he said on a conference call with reporters last week. "We like it the way we have it in Pennsylvania."
The pressure to change the status quo in Pennsylvania has increased. Several bills .. http://bit.ly/1H0K7wj .. seeking to legalize payday loans, or other short-term loans under different names, have been debated in the Legislature in recent years. None .. http://bit.ly/1uFN0Cc .. has passed.
A bill being drafted now will be modeled after the federal plan, said its sponsor, Sen. John Yudichak. He said it won't permit payday loans, but yearlong loans of between $1,000 and $5,000 that will be underwritten. Interest could be up to 36 percent, plus an origination fee.
Yudichak, a Democrat representing Carbon and Luzerne counties, told me Wednesday he hopes to speak with the Consumer Financial Protection Bureau to get its input on the legislation.
"We're going to try to mirror their intent and make sure that the product is a product that makes credit accessible, affordable and safe for those that are high-risk consumers," he said. "The overall intent is to make sure people don't get trapped in a debt cycle."
Critics already are campaigning against his plan, saying the loans would be too costly and still could result in borrowers being trapped in debt. Yudichak told me he considered their concerns when drafting the bill, which he expects to introduce after the legislative budget debate.
While consumer advocates in Pennsylvania oppose the federal plan because they say it isn't tough enough, payday lenders oppose it because they consider it to be too tough.
They testified at last week's hearing that the Consumer Financial Protection Bureau's own data show few complaints about payday loans from licensed lenders. They said authorities should be focusing on unlicensed, illegal lenders that are taking advantage of borrowers. Onerous regulations would drive thousands of licensed lenders out of business and drive borrowers to illicit ones, the lenders said.
Banks that want to offer short-term loans to people without sterling credit would be deterred, said Richard Hunt, president and CEO of the Consumer Bankers Association. The underwriting requirements would cost too much for banks, he said, and would take too long for borrowers in need of immediate credit.
If you have an opinion on payday lending, the Consumer Financial Protection Bureau is taking comments through Sept.14. Send them to FederalRegisterComments@cfpb.gov or Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G St. NW., Washington, DC 20552. Include Docket No. CFPB-2016-0025 or RIN 3170–AA40 in the subject line of your email or with your mailed remarks.
The Watchdog is published Thursdays and Sundays. Contact me at watchdog@mcall.com, 610-841-2364 or The Morning Call, 101 N. Sixth St., Allentown, PA, 18101. I'm on Twitter @mcwatchdog and Facebook at Morning Call Watchdog.
Copyright © 2016, The Morning Call
http://www.mcall.com/news/local/watchdog/mc-payday-loans-law-pennsylvania-watchdog-20160608-column.html
See also a WSJ article linked here
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=123211681
.. shtsqsh, the obvious answer to yours is, if it were that simple the situation would have been fixed a long time ago .. you have a penchant
for seeing simple solutions where, if one takes all participants and needs into consideration, there obviously isn't one .. anyway, another ..
Proposed federal regulations on payday lenders are weaker than regulations already in place in Pennsylvania. (FILE PHOTO / THE MORNING CALL)
Paul MuschickPaul MuschickContact ReporterThe Watchdog
June 8, 2016, 8:46 PM
[f & t share] Could proposed payday loan regulations allow lenders to open up shop in Pennsylvania?
A national plan to protect struggling families from high-interest payday loans that can trap them in debt sounds good, but it could be bad for Pennsylvania.
The state already has strong protections through a law that caps interest rates on small loans at about 24 percent. That's kept payday loan stores out of the state because loans aren't profitable enough here.
Federal regulations proposed last week by the Consumer Financial Protection Bureau .. http://www.mcall.com/topic/business/u.s.-consumer-financial-protection-bureau-ORGOV00000233-topic.html .. are weaker. Those rules wouldn't preempt the state law, but consumer advocates fear they could undermine it by prompting legislators to loosen the state law to bring it in line with the national standard.
One state lawmaker already is citing the feds' plan as he seeks to legalize loans at interest rates up to 36 percent, possibly with fees on top of that.
Without the strong state law, Pennsylvania residents would pay an estimated $489 million annually in fees for payday loans and vehicle title loans, according to a study released last week by the Center for Responsible Lending.
Payday loans usually are two-week loans due on the borrower's next payday. They carry high interest and fees, often triple digits when calculated as an annual percentage interest rate. Some borrowers can't afford to repay the loan when it's due, so they roll it over or take out a new loan, creating a cycle of debt .. http://bit.ly/VczTrh .
Title loans .. http://bit.ly/1D2N4uG .. are just as dangerous. Borrowers use their vehicles as collateral, and often face repossession .. http://bit.ly/1Q9lm4D .
The proposed federal regulations wouldn't set limits on interest rates in all cases, but would require most loans to be underwritten to determine if the borrower can afford to repay them. That's something that doesn't typically happen now. The proposal also would limit how many loans a borrower could take in a short period of time.
"By putting in place mainstream, commonsense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail," said Richard Cordray, director of the Consumer Financial Protection Bureau.
What concerns consumer advocates in Pennsylvania is that the proposed regulations would allow some small loans to be made without extensive underwriting, and at interest rates higher than what is permitted here now.
"Any exception risks sending the message that the CFPB has sanctioned a whole category of high-cost, predatory loans as desirable and safe, when in fact they are harmful and dangerous to borrowers," Kerry Smith, senior staff attorney at Community Legal Services in Philadelphia, testified at a hearing in Kansas City last week.
Full underwriting wouldn't be required for short-term loans of up to $500, and for loans of up to two years if the total cost to the borrower does not exceed 36 percent, excluding a "reasonable" origination fee. The Defense Department already caps the cost of those types of loans at that rate for active-duty military service members.
Bill Harris .. http://www.mcall.com/topic/politics-government/bill-harris-PEPLT002730-topic.html .. of Bethlehem, president of the Pennsylvania chapter of the Military Officers Association of America, said if the proposed national rule can't be strengthened, the state would be better off without it.
"Just don't do anything," he said on a conference call with reporters last week. "We like it the way we have it in Pennsylvania."
The pressure to change the status quo in Pennsylvania has increased. Several bills .. http://bit.ly/1H0K7wj .. seeking to legalize payday loans, or other short-term loans under different names, have been debated in the Legislature in recent years. None .. http://bit.ly/1uFN0Cc .. has passed.
A bill being drafted now will be modeled after the federal plan, said its sponsor, Sen. John Yudichak. He said it won't permit payday loans, but yearlong loans of between $1,000 and $5,000 that will be underwritten. Interest could be up to 36 percent, plus an origination fee.
Yudichak, a Democrat representing Carbon and Luzerne counties, told me Wednesday he hopes to speak with the Consumer Financial Protection Bureau to get its input on the legislation.
"We're going to try to mirror their intent and make sure that the product is a product that makes credit accessible, affordable and safe for those that are high-risk consumers," he said. "The overall intent is to make sure people don't get trapped in a debt cycle."
Critics already are campaigning against his plan, saying the loans would be too costly and still could result in borrowers being trapped in debt. Yudichak told me he considered their concerns when drafting the bill, which he expects to introduce after the legislative budget debate.
While consumer advocates in Pennsylvania oppose the federal plan because they say it isn't tough enough, payday lenders oppose it because they consider it to be too tough.
They testified at last week's hearing that the Consumer Financial Protection Bureau's own data show few complaints about payday loans from licensed lenders. They said authorities should be focusing on unlicensed, illegal lenders that are taking advantage of borrowers. Onerous regulations would drive thousands of licensed lenders out of business and drive borrowers to illicit ones, the lenders said.
Banks that want to offer short-term loans to people without sterling credit would be deterred, said Richard Hunt, president and CEO of the Consumer Bankers Association. The underwriting requirements would cost too much for banks, he said, and would take too long for borrowers in need of immediate credit.
If you have an opinion on payday lending, the Consumer Financial Protection Bureau is taking comments through Sept.14. Send them to FederalRegisterComments@cfpb.gov or Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G St. NW., Washington, DC 20552. Include Docket No. CFPB-2016-0025 or RIN 3170–AA40 in the subject line of your email or with your mailed remarks.
The Watchdog is published Thursdays and Sundays. Contact me at watchdog@mcall.com, 610-841-2364 or The Morning Call, 101 N. Sixth St., Allentown, PA, 18101. I'm on Twitter @mcwatchdog and Facebook at Morning Call Watchdog.
Copyright © 2016, The Morning Call
http://www.mcall.com/news/local/watchdog/mc-payday-loans-law-pennsylvania-watchdog-20160608-column.html
See also a WSJ article linked here
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=123211681
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