State House lawmakers have approved regulations of “payday loans” in Pennsylvania.
But detractors say the measure will make predatory loans more commonplace in Pennsylvania.
The small loans tend to be taken out for a couple weeks at a time, and they often come with high interest rates and fees.
It’s a controversial practice, but it does have its defenders.
John Rabenold, a spokesman for the industry group Community Financial Services Association of America, says it’s better to take out a payday loan than it is to pay bills with a check that bounces.
“A single bounced check can run in hundreds of dollars in fees. And that’s what customers are trying to find alternatives to,” Rabenold said.
Opponents of the short-term loans say such arguments are distractions, and that overdraft fees incurred with a bounced check are just as predatory as payday lending.
They say the House proposal would increase the year-long interest rate of a short-term loan from the current cap of 24 percent to a figure in the triple-digits.
The bill would also require lenders to be licensed, and put limits on the amount people can borrow.