Payday loan bill invites greed

A pack of avaricious wolves that has been circling Harrisburg is salivating to feed on the working poor with a bill that would legalize exploitative payday loans that could carry interest rates in the triple digits.

Dressed in the clothing of consumer protection, the bill strips away Pennsylvania's long-held and strongly enforced protections against predatory short-term loans. Sponsored by Rep. Chris Ross (R., Chester), the legislation would drop-kick the state's 24 percent annual-percentage-rate cap. As a result, individuals with marginal incomes, including truck drivers, nurses, and clerks, could be pushed into a cycle of debt.

It's easy for that to happen: Lured by the availability of quick money, a borrower may take out a two-week loan and pay it back on payday, with interest and fees. A few days after payday, though, he realizes he can't pay his bills, so he takes out another loan. Of course, he has less money to pay the new debt because he's just paid an unconscionable premium to the payday lender.

The cycle repeats, keeping people indebted to the lenders an average of 200 days a year, according to national statistics.

Borrowers secure the payday loans with their bank accounts by either giving the lender a postdated check or, incredibly, giving the lender Internet access to bank accounts. Ross' bill would also give payday lenders access to unemployment and Social Security checks. Talk about vulnerable people!

On a $300 loan, the legislation would allow $42.50 in interest and fees. Annualized, that's 369 percent. Reporting on the devastating effect these loans have on soldiers, the Defense Department in 2006 persuaded Congress and former President George W. Bush to cap the interest at 36 percent for military personnel and their families.

But Ross and his pals want to take Pennsylvania in the opposite direction. They're ignoring a national trend in which several states, including Oregon, New Hampshire, Ohio, and Arkansas, have rolled back triple-digit interest rates.

Churches, community groups, and civil rights organizations in Missouri have decided not to wait for government to protect them. They have collected 180,000 signatures on a petition for a referendum on legislation to stop usury.

Such grass-roots efforts may be why some of the same out-of-state lenders who were rebuffed in a 2010 Pennsylvania Supreme Court ruling — when they tried to flout the state's controls on Internet lending — are again prowling around Harrisburg. Consumer suspicion nationally is shrinking their hunting ground.

The country is still reeling from its last debt spree. Families burdened with variable-rate mortgages and other exotic financial products are still losing their homes. That makes it even more galling that Pennsylvania legislators would be accomplices in springing a debt trap on low- and moderate-income families. They've even fast-tracked Ross' bill, putting it on the House calendar for a vote this week.

After learning of the bill's true implications, about a dozen of its nearly 60 cosponsors have backed off. The rest should follow suit. Pennsylvania has already dealt with predatory payday lenders, it shouldn't be inviting more wolves into the commonwealth.