At present, these kinds of loans which offer fast access to small sums of cash in exchange for heavy rates of interests are not permitted in the state due to the enforcement of interest rate caps. A maximum annual percentage rate (APR) of 30% is chargeable in Pennsylvania, which doesn’t come close to the three and often four-figure rates attached by payday lenders already in operation across the US.
Consumers groups have reacted to the news with extreme concern having already labeled the payday loan industry a ‘disease’ on the working classes which encourages a spiral of debt from which there is often no escape. They argue that it is only ever in the rarest of occasions that payday loans are taken out just one time for a one-off emergency – more often than not the borrower becomes dependent on the cash they offer and ends up drowning in debt.
Though a sizeable step closer to legalization, the legislation will now have to go before the appropriations committee before it be voted on at the Senate. There’s little indication at this stage whether or not the bill would gain enough Senate support to be implemented, nor is there any clear timeframe as to when payday loans could realistically be legalized.
As it stands, a total of 38 US states have implemented their own unique legislation in order to allow payday loans to be offered and take out within their confines, so says the National Conference of State Legislatures. However, no new states have attempted to bring in the payday loans industry since 2005 and it was thought that controversy and opposition had pretty much sealed the lid on how far such services would spread across the US.
Policy groups are once again making their voices heard with claims that payday lenders are predatory by nature and only stand to harm a consumer market which is in many areas already on its knees. They argue that short-term lenders target the weak and vulnerable in order to capitalize on their desperation, leading to the addition of extreme rates of interest as and when balances are not repaid or paid late.
In the world of the payday lender, it is not uncommon to find APR figures above the 2,000% mark – something consumer rights groups would like to see outlawed nationwide.
On the other side of the equation however, payday lenders are adamant that they are bringing
Americans the kind of fast and easy access to emergency cash that would otherwise be entirely out of their reach. They site over-the-top banking charges like overdraft penalties and bounced checks as clear and valid reasons how and why payday loans can in fact save a person money, if used in accordance with their respective terms and conditions.
They also argue that high rates of interest are inevitable as the loans are due to be repaid in a matter of weeks rather than years, making the standard APR figure less than relevant. What’s more, they argue that will lower rates of interest and milder penalties for non-repayment, the result would be the further encouragement of irresponsible borrowing practices.