Stack Opposes Payday Lending Legalization Bill
PHILADELPHIA, June 4, 2013 – Citing its excessive fees, forced dependence by financially imperiled consumers, and its unfairness amongst military members and veterans, state Sen. Mike Stack today voted against Senate Bill 975 and issued the following statement:
“I voted against the bill because numerous studies on payday lending, including the PEW study, the Consumer Financial Protection Bureau study, and even the testimony given by payday lending compliance company Veritec shows payday lending is not used for short-term financial needs. It’s not used for life’s little emergencies like companies advertise. The average consumer takes out eight loans per year. They use it over and over again.
“This idea of eight loans a year … is the exact debt trap that was at the core of the controversy last year. This bill writes that problem into state law.
"The larger problem is that consumers need to cut expenses or gain more revenue to cover their bills. They are deficit-spending and they need a long-term, sustainable plan to balance their household budgets. In fact, the PEW report found that 80 percent of payday loan customers would cut their expenses if payday loans were not available,” Stack said.
The PEW study also found that:
- 52 percent of all payday loan borrowers overdrafted their checking accounts and nearly a third of those consumers said payday loans caused the overdraft;
- 14 percent of micro loan borrowers can afford to repay the average payday loan;
- 51 percent of payday borrowers “need a cash infusion” to satisfy a payday loan; and
- 37 percent would take a payday loan on any terms offered simply out of desperation.
“I think this issue also shows the need for financial literacy improvements. We need to teach people how to manage money, make a budget, and let them know there is no magic wand for financial problems. Short-term fixes don’t make things better, and when you use a product with high fees it can make things worse,” Stack said.
“I also voted against this bill for the unequal treatment it gives active military members, veterans, and military reservists and members of the National Guard.
“Our veterans and our reservists also serve and fight for our country and deserve the same protections as active duty members of the military. I am not alone on this concern. The Military Officers Association of America Pennsylvania Chapter and the Pennsylvania War Veterans Council also oppose this bill.
“If we are going to move forward with a short-term lending product, let’s adopt the federal military payday loan law and include a 90-day loan term, 36 percent APR inclusive of all fees and interest, and no access to the borrower’s bank account.
“Payday lending is not used for short term financial needs. It’s not used for life’s little emergencies like companies advertise. They use it over and over again and they need real help and protection,” he said.
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