News Room
Letter RE FDIC Action Against Payday Lenders
February 23, 2006
Dear Senator,
According
to a press release issued by the First Bank of Delaware on February 21,
FDIC regulators have directed the bank to discontinue offering “payday”
loans. Reports indicate that the basis of the FDIC order were problems
in the short-term loan and installment products First Bank of Delaware
was marketing and servicing through third-party brokers.
Advance
America, which currently operates 101 payday lending centers in
Pennsylvania, indicated in a press release issued yesterday that a
similar FDIC action may be pending against its partner bank. FDIC
intervention may eliminate Advance America’s ability to continue its
Pennsylvania payday lending operations. That is why Advance America is
pushing HB 1478; HB 1478 exempts the industry from existing
Pennsylvania protections as well as FDIC oversight.
HB
1478 opens the door statewide for payday lenders to engage in some of
the most predatory aspects of the industry. Not only would HB 1478
insulate payday lenders from many consumer protections under
Pennsylvania law, it would allow the industry to operate outside the
very guidelines the FDIC enforced against the First Bank of Delaware.
FDIC guidelines prevent keeping a payday loan borrower in the product
for more than 90 days during any one year. HB 1478 eliminates this cap,
giving payday lenders legal authority to keep borrowers in a 400%
obligation for far longer. Therefore, HB 1478 effectively deregulates
the most predatory aspect of the product. Any attempts to “regulate”
the industry through vehicles like HB 1478 will have the effect of
weakening consumer protections already in place.
The
payday lending issue became a problem in Pennsylvania due to a lack of
enforcement. Payday lenders have exploited this situation to create a
climate in which any “regulation” is considered an improvement on the
status quo. New York and North Carolina are but two examples proving
that adequate enforcement of state law is sufficient to eliminate the
predatory aspects of payday lending. Attorney General Corbett’s work to
shut down an illegal internet-based payday lending operation is
evidence that similar efforts can work in Pennsylvania.
We
urge you to support SB 101 which would make it even easier to utilize
existing state law to eliminate the predatory aspects of payday
lending. Please reject HB 1478, which effectively amounts to an
industry expansion bill.
Thank you,
Jim Swoyer
