Yesterday,
Chairman Gibson Armstrong’s office confirmed that the Senate Committee
on Banking and Insurance would not be considering House Bill 1478 for
the foreseeable future. A February committee vote on HB 1478 had been
tentatively postponed for the week of March 13, 2006. This comes on the
heels of Banking Secretary Bill Schenck’s withdraw of the department’s
support for HB 1478. Recent FDIC activity convinced the Secretary that
HB 1478 was ultimately an authorization bill.
Payday
lending in not authorized by Pennsylvania law, but it has been going on
anyway due to the existence of partnerships between payday lending
companies and out-of-state banks. While Pennsylvania usury law would
prohibit payday lenders from making these directly, banks are not
covered by state usury laws. By making the loans in the name of the
banks, the payday lenders have been able to circumvent the law.
However, pressure from the FDIC has resulted in all such banks pulling
out of these partnerships during the last several weeks.
"The consequence of these two actions--the FDIC stopping "rent-a-bank"
scams and the death of HB1478--means that payday lending is, for all
practical purposes, over in Pennsylvania," explained Irv Ackelsberg of
Community Legal Services in Philadelphia. "This is a very satisfying
victory for Pennsylvania consumers."
HB 1478 would have legalized payday lending without the necessity of
any bank partnerships. The bill had been supported by the Rendell
Administration but that support was based on the Banking Department's
assessment that the FDIC would not stop the bank partnerships and that
the industry, although potentially dangerous to consumers, should be
regulated if it was here anyway. PennPIRG and other groups making up
the Pa. Coalition for Responsible Lending had argued that the FDIC did
appear to be expressing disapproval of "rent-a-bank" payday lending and
that HB 1478 would effectively be saving the payday lenders from FDIC
enforcement.
Senator Vincent Fumo led the fight in the Senate against HB 1478, and
he offered his own bill, SB 101 to ban payday lending outright. As a
result of his efforts, both bills were tied up in Committee at the time
the FDIC began taking its action.
“Payday lenders trap vulnerable consumers into vicious cycles of debt
and regulators are beginning to notice.” said Jim Swoyer, Consumer
Advocate with the Pennsylvania Public Interest Research Group
(PennPIRG).
Swoyer
continued, “We applaud Senator Fumo’s hard work in standing up to this
predatory industry. Without Senator Fumo, HB 1478 would likely already
be law by now. If that had happened, FDIC efforts to protect consumers
would not have benefited Pennsylvanians.”
Advance
America, which currently operates 101 payday lending centers in
Pennsylvania, publicly stated that it will no longer be able to issue
new payday loans in Pennsylvania after March 27, 2006. BankWest, Inc.
had announced that it would cease its payday loan originations on March
27, leaving Advance America without a partner.
