Morning Must Reads: Payday Loans Are Bad For Consumer and School Districts Report Financial Distress

In case you missed it, The Philadelphia Inquirer ran a strong editorial Monday against legalizing predatory payday lending in Pennsylvania.

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....

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.

This morning, Lancaster Intelligencer Journal and New Era columnist Jeff Hawkes questions the wisdom of the effort to expand predatory payday lending in Pennsylvania.

Most of the payday lending industry-crafted talking points in support of House Bill 2191 frame the bill as a form of consumer protection. This is a key reason why a number of lawmakers initially signed onto the bill but have now withdrawn their support. Some legislators were sold on consumer protection by a "smart" lawmaker without being told they were legalizing a practice that increases the incidence of bankruptcy among consumers who use it. 

One of the consumer protection arguments that figures prominently in the Hawkes column is the industry talking point that illegal predatory payday lending goes on now so all HB 2191 does is regulate and make safer an illegal activity. The frank reality is the bill would legalize more harm to consumers than it promises to stop.

The Center for Responsible Lending estimates that Pennsylvania's current law capping interest rates on small loans at approximately 24% saves Pennsylvania consumers $234 million in excessive fees each year. Good data on how many consumers currently attempt to take out payday loans does not exist, but reason suggests the presence of payday lending storefronts in poor communities would generate more payday borrowers than there are currently.  

State Rep. Chris Ross, a Harvard graduate who once landed on a list of Pennsylvania's smartest lawmakers, is butting heads with consumer advocates, churches and others who say his payday loan bill opens the state to predatory lenders...

Ross would tolerate some harm to avoid greater harm. But consumer advocates say the degree of harm to low-income families that Ross accepts simply is not acceptable.

And that's a reasonable position. The principle of first do no harm should apply.

In a survey of 256 of the commonwealth's 500 school districts, more than half of the districts reported they were expecting to experience financial distress within three years.

A survey of Pennsylvania school districts to be made public Tuesday shows many headed toward insolvency in the next few years, and to avoid it they are weighing cuts to music, art, physical education, and electives while increasing class size and raising taxes.

Two hundred and eighty-one of the state’s 500 districts — 56 percent — participated in the late April survey by the Pennsylvania Association of School Administrators (PASA) and the Pennsylvania Association of School Business Officials (PASBO). The names of the specific districts were not released, a condition of their participation.

More than half said they anticipated being in financial distress — not being able to meet their obligations — within three years, if local and state revenues don’t increase. Three percent — more than a half-dozen — said they were already broke.

Recently, the Pennsylvania State Education Association (PSEA) plugged school district financial data into a statistical model to identify the districts in Pennsylvania likely to face financial distress.


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