Payday loans are back on Harrisburg's docket

Posted: June 26, 2013

HARRISBURG - The increasingly hostile debate playing out in the Capitol over payday lending may not reach biblical proportions, but the conflict is emerging as a saints vs. sinners struggle over working class access to cash.

Religious groups are leading efforts to snuff out newly revived legislation to legalize payday lending - the short-term, high-interest loans for people with no credit and no ability to obtain traditional bank loans.

Citing Scripture, they have characterized these storefront lenders - which closed up shop in Pennsylvania after a state Supreme Court ruling in 2010 set interest rates so low that the business was no longer profitable - as predators on the poor.

"There is a theological basis for usury," said Steve Drachler, executive director of United Methodist Advocacy in Pennsylvania. "When Jesus went to the Temple, one of the few instances where he showed anger was in driving out the money lenders. This is no different than that."

Now, say Drachler and others, industry lobbyists are trying to muzzle them with threatening letters and personal attacks online and in newspapers.

"It smacks of desperation to personally attack people in the faith community who are speaking out against payday lending," said the Rev. Sandra Strauss, a Presbyterian minister and public advocacy director for the Pennsylvania Council of Churches.

Al Bowman, executive director of the Pennsylvania Consumer Credit Association, said the bill would make affordable loans available to needy people now turning to loan sharks or questionable online lenders.

And he accused faith groups of throwing the first public stones.

"I have a serious issue when a reverend comes out and calls someone a sinner for something that would benefit 300,000 people," he said, referring to an estimate produced by the Pew Charitable Trusts of the number of Pennsylvanians who took out payday loans between 2006 and 2012.

Bowman was referring to Strauss, who in an opinion piece in the Harrisburg Patriot-News wrote that allowing "unscrupulous lenders" to exploit the poor goes against the biblical concept of "love thy neighbor."

Bowman wrote to Strauss and others asking them to "cease and desist spreading inaccurate and blatantly false information."

To Drachler, once spokesman for now-imprisoned former House Speaker John M. Perzel, that smacked of the worst kind of negative attack in a political campaign.

Bowman, a former House Republican staff member who served a term under house arrest for his role in the Perzel scheme to develop a campaign database with public money, said lenders who want to provide a regulated service are being singled out.

"The Lutheran Church isn't calling Wells Fargo a sinner," he said.

Despite universal disapproval by groups that represent the poor and those on fixed incomes, including AARP, Community Legal Services, and the Housing Alliance of Pennsylvania, the bill was narrowly voted out of the Senate Finance Committee within days of its introduction this month.

Senate sources, however, say it is unlikely to get a vote before the summer recess.

Bill supporters cite thousands of struggling Pennsylvanians going to Delaware (New Jersey prohibits such loans) or borrowing through fly-by-night outfits on the Internet.

Payday lenders closed up shop in Pennsylvania after the state Supreme Court ruling upheld a law requiring lenders to be licensed and capped interest rates significantly below the usual payday loan rates.

The bill, sponsored by Sen. Pat Brown (R., Lehigh), would cap interest rates at 28 percent and fees at 5 percent of the loan amount. Borrowers would be barred from receiving a second short-term loan to pay off an existing loan. Loans could also be rescinded the next day without penalty or fee, and the bill calls for an extended repayment option.

"It would be the most regulated state in nation," Bowman said.

Kerry Smith, a staff lawyer for Community Legal Services Inc., said that with interest and fees, the cost of the loans could reach 300 percent.

And, she said, the legislation would give lenders access to a borrower's bank account, which means payday lenders would get paid first while rent and utilities would go unpaid, which could lead to shutoffs and eviction or foreclosure.


Contact Amy Worden at 717-783-2584 or aworden@phillynews.com or follow @inkyamy on Twitter.

comments powered by Disqus
|
|
|
|
|