Pa. advocates line up against Trump’s predatory changes to payday lending rules | Friday Morning Coffee

May 17, 2019 7:16 am

Money Mart payday loans and check cashing store in Sacramento, California (WikiMedia Commons)

Good Friday Morning, Fellow Seekers.
Advocates from across the country are sounding off on what they say are efforts by the Trump administration to weaken protections against predatory payday lending, which sees borrowers pay skyrocketing interest rates, locking them into an inescapable cycle of debt.

Under a rule set to go into effect later this year, the U.S. Consumer Financial Protection Bureau will rescind an Obama-era requirement that lenders first determine a borrower’s ability to pay before they give them a loan.

That’s a “fundamental principle of responsible lending,” a coalition of advocates said this week.

The CFPB first announced the rule change in February. Public comments on the proposal closed on Thursday.

The coalition, known as “Paydayfreelandia,” includes community, civil rights, labor, and faith-based groups from 16 states (Pennsylvania among them) and Washington D.C. Laws in place in those states “ensure that families are not subjected to the devastating payday lending debt cycle, which often leads to financial insolvency, overdraft fees, closed bank accounts and bankruptcy.”

According to research by The Center for Responsible Lending, the APR offered by some payday lenders can range from a crushing 533 percent to 792 percent.

As we reported back in February, those are rates only a loan shark could love.

“It is the CFPB’s job to protect consumers from harmful financial products. They should do their job,” said Rabbi David Rosenn, the executive director of the Hebrew Free Loan Society, a nonprofit lender based in New York City, said in a statement. “When these regulatory agencies put rules in place, they do it to protect Americans from likely harm. When they undo the rules and let industries regulate themselves on the most basic safety issues, people tend to get hurt.”

Among the real losers here, ironically, are those MAGA-hat wearing Trump loyalists in Rust Belt states who can least afford the mafia-level interest rates.

“The ability-to-repay rule is a common sense and reasonable requirement that protects borrowers from taking on loans they cannot afford and from falling into debt traps with crippling fees and interest rates,” Beverly Brown Ruggia, an organizer for New Jersey Citizen Action, said in a statement. “The decision to rescind the rule is an example of the CFPB’s new and overt mission … to protect maximum profits for financial companies regardless of the devastating harm they cause consumers.”

Last year, the industry tried to convince Pennsylvania’s Republican-controlled House of Representatives to approve a bill that would have opened a massive loophole in the state’s very strong safeguards against predatory lending.

The bill would have allowed payday lenders to pose as “loan brokers,” which would have allowed them to get around interest rate caps and charge unlimited fees to borrowers.

The loan-broker bill never cleared a critical Pennsylvania House committee. And it died at the end of last year’s legislative session. So far, it appears the bill has not yet resurfaced in this year’s legislative session.

“Although Pennsylvania has never legalized these loans, payday lenders employed a variety of schemes in the past to set up shops in our communities. Fortunately, courts and regulators effectively stopped debt-trap lending, bringing relief to consumers in our state,” Kerry Smith, a senior staff attorney for Community Legal Services in Philadelphiasaid in a statement. “Having once seen the harms of payday lending, we know that families in Pennsylvania are better off without these unaffordable, predatory loans. That’s why we have been working with a broad coalition to keep our state law strong, and why the CFPB should keep its national rule for states without interest rate caps.”

We said before that, when it comes to the Trump White House, it’s just as important to watch what it does as what it says. This is one of those times.

Our Stuff.

Gov. Tom Wolf notched the highest approval rating of his administration in a Quinnipiac University poll out on Thursday. The poll release comes as the Democratic governor gears up for his fifth budget tango with the Republican-controlled General Assembly. The consensus is a good state economy should make for easy sailing.

Sarah Anne Hughes wraps up our look at due process issues by explaining what it means — and doesn’t mean — when a legislator under fire cries out for due process.

On our Commentary Page, new Capital-Star Opinion contributor Mark O’Keefe says next week’s primary election is a reminder that Pennsylvania really needs to make it easier for people to vote.

And Barry Shutt, keeper of the Capitol’s pension clock, says Pennsylvania faces its next, big financial meltdown with the Turnpike toll debacle. He has a few suggestions on how to fix it.

The Inquirer previews Joe Biden’s trip to Philadelphia on Saturday.
PennLive has a guide to some of the more fun primary races around central Pennsylvania.
The Post-Gazette has its take on state House Republicans’ push to get Rep. Brian Sims punished more effectively.
The Morning Call has its own procrastinator’s guide to next week’s primary election.
Teams from UPMC and AG Josh Shapiro’s office faced off in state Supreme CourtThe Tribune-Review reports.

Here’s your #Pennsylvania Instagram of the Day:

WHYY-FM highlights the looming implosion of Martin Tower in Bethlehem and looks at what it says about the changing face of the Lehigh Valley. The building is the former headquarters of U.S. Steel.
A new poll finds that most Pennsylvanians think that climate change is a major public health risk, the PA Post reports.
PoliticsPA asks its readers whether independents should be allowed to vote in primary elections.
The White House is using patriotism as a justification for the pain from its trade war with China, Politico reports.
It will probably not shock you, but the White House’s latest economic plan came without any outreach to DemocratsRoll Call reports.

Gov, Tom Wolf
 starts his Friday in Philly, with a 9 a.m. event with Mayor Jim Kenney, involving the Baseball Hall of Fame. And if you thought the RestorePA tour was over, forget it. At 2 p.m, Wolf will merch it with a stroll through downtown Steelton, Dauphin County. You can check out any time you like …

What Goes On (Nakedly Political Edition).
Helping you plan ahead: On Saturday, state Rep. Eddie Day Pashinski holds … wait for it … ‘A Great Day of Golf with Eddie Day Pashinski,” at Sand Spring Country Club in lovely Drums, Pa. Admissions from a merely great $95 all the way up to a truly spectacular $500.

Heavy Rotation.
Here’s a preposterously extended, but thoroughly wonderful, remix of Yaz’s classic “Don’t Go,” to get the weekend rolling.

Friday’s Gratuitous Hockey Link.
Boston wrapped up its Eastern Conference sweep of Carolina on Thursday night, thanks to a 4-0 win at PNC Bank Center, putting the Bruins into the Stanley Cup final. But, wow, what a run by our beloved Hurricanes. Thanks for a great season, fellas.

And now you’re up to date.

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John L. Micek

A three-decade veteran of the news business, John L. Micek is the Pennsylvania Capital-Star's former Editor-in-Chief.