As it stands, caps on interest rates have made it impossible for payday lenders to operate anywhere in Pennsylvania. The maximum annual rate of interest (APR) any lender can attach to a loan is currently 30%, which in turn rules out the payday loan where interest rates usually top the 1,000% and even the 2,000% mark.
Activists opposed to payday loans making their way into Pennsylvania have spoken of their growing concern that such legalization would further complicate what is already a debt “disease” eating away at the poor. While payday lenders remain adamant that their services are to be called upon for one-off emergencies here and there, critics argue that using the services quickly becomes habitual and those already in financial trouble can end up buried in debt in no time at all.
It will now be in the hands of the appropriations committee to decide whether or not the bill is taken any further. Regardless of the outcome, there’s no accurate way of gauging how long it would take for payday loans to be officially legalized in the state and begin being offered both online and on the High Street.
At present, 38 states across the US have put in place legislation which allows the payday loans industry to operate legally both online and on the High Street. The last time a state made efforts toward supporting the payday loans industry was back in 2005, therefor it had been assumed that the remaining states would remain opposed to payday loans and the businesses offering them.
According to those taking a stand against the loans, the industry as a whole is specifically tailored in order to appeal to those in weak and vulnerable positions in order to profit at the borrower’s expense. Loans are offered with no credit checks made and often no proof of employment needed, under the condition that they are repaid within one month. Should the borrower face difficulties in repayment however, interest rates as high as 2,000% come into play and the outstanding balance quickly spirals out of control.
On the flipside of the argument though, the lenders themselves claim to be offering an essential service that every day helps responsible borrowers out of difficult scrapes. They state that payday loans are 100% safe if the borrower sticks to his or her terms and doesn’t take out such a loans when unsure as to whether it can be repaid.