Forward Observer — Honey, The “In-Laws” Are Back! The Consumer Credit Association (Payday Lenders)

Editor’s Note:  Kerry Smith, a Staff Attorney for Community Legal Services of Philadelphia was the speaker at our March Council Meeting.  Ms. Smith, at that time, explained the harm of such lending legislation and how other states which have passed such wish they could turn back the clock.  She urged the Council to stand up for our veterans and oppose any such legislation.

STAND WITH OUR MILITARY VETERANS: OPPOSE PAY DAY LENDING

Uninvolved Veterans, Get Off Your Derrieres and Protect Your Comrades

The Pennsylvania Council of Chapters, Military Officers Association of America, strongly opposes Senate Bill 975, the Micro Loan Program, recently introduced on May 31, 2013 to legalize payday lending in Pennsylvania at 300% interest on a two-week loan.  We agree with them.  The bill,  which will result in such usury despite possible good intentions, has surprisingly made it out of the Senate Banking and Insurance Committee by a narrow 8 to 6 voting margin and is now on the floor of the Senate for a vote in a few more days. 

Since the possibility exists for our legislators to fail to take — or are not given — the time to completely read the bills they vote upon on a Senate or House floor (let alone reflect upon their possible unintended consequences), your timely action could make the difference in their decision-making.

Military veterans should understand the harm caused by payday lending.  The Department of Defense certainly realized its impact on military readiness and acted to have Federal legislation passed, as we previously reported.  However, the Federal legislation does not help those not on active duty. Hence, an issue remains.

The payday loan industry relies on revenue from borrowers being caught in a debt trap in which they unable to repay the original high interest, short-term loan because they have no source of money to pay remaining obligations without returning for another loan.  We’re told this debt trap is the rule, not the exception.  Ironically, the result does not lead a credit- or loan-worthy record, one purported intention of the bill.

And before obtaining a longer-term “micro loan”,  Senate Bill 975 introduces the hurdles of requiring eight consecutive, two-week, payday loans and then a sixty-day loan.  Last legislative session the Consumer Credit Association reasoned the legislation was needed for those who could not otherwise get an emergency loan.  Senate Bill 975 now sets the stage for a financial emergency lasting  four consecutive months or more.

As noted, Federal protections only cover military members and their families while on active duty.  The flip side is it does not include the nearly one million veterans in our state, many of whom are elderly living on fixed incomes, nor does it protect our National Guard and Reserve forces not on active duty — or their families – a troubling scenario.  The disclosure provisions required to identify for military veterans alternatives to this method of obtaining funds are inadequate and inaccurate.

Even allowing for good intentions behind SB 975, this bill does not meet its purported purpose of  “…put[ting] in place comprehensive consumer protections while ensuring equal access to more affordable, safe and flexible credit options for all Pennsylvanians …” (stated in the prime sponsor’s Bill Memorandum).  Instead, the bill is likely a Trojan Horse to catch Pennsylvanians’ State Government legislators unaware.  Heavy professional lobbying and the timing behind this action make the circumstances worst.  Despite defeat last legislative session over House Bill 2191, SB 975’s predecessor, the issue won’t go away — a constant vigil is required by Pennsylvania’s citizens because Pennsylvania’s sound law protecting its citizenry from usury is ultimately in jeopardy.  [The Department of Defense cited it as among the strongest and most effectively enforced in the country when it sought a federal legislative solution.]

Therefore, we suggest our membership and others stand with MOAA and other organizations which oppose this legislation and relay their concerns to their respective representatives.  A direct call or letter is best [time may have run out for a letter], but even using  this Internet email link will help.  It is bad law.  Micro-lending may be needed, but its purpose should be directed to small business lending, not consumer financing; and initial payday lending as a qualification for a micro-loan should not be its gateway, regardless.

For more information on the subject, consult http://www.stoppaydayloanspa.com/ .

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RJH

5 June 2013

Update (9 June 2013): The Pennsylvania State Veterans Commission, a commission authorized by State Government, voted against SB 975 on 7 June.