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WHEREAS, the Pennsylvania House of Representatives is currently considering HB 2191, which would legalize predatory payday loans, going against historic Pennsylvania lending laws; and
WHEREAS, HB 2191 legalizes triple-digit interest rates of 400% and higher for payday lenders; and
WHEREAS, HB 2191 would allow lenders to require full repayment of a loan after “at least one installment of income of the customer,” or their next paycheck; and
WHEREAS, HB 2191 would enable payday lenders to require one-time balloon payments of the full loan amount, plus interest and fees; and
WHEREAS, HB 2191 would legalize the use of post-dated check or debit authorization as security for the loan and a means of repayment; and
WHEREAS, required one-time balloon payments trap borrowers in debt, making it impossible to repay the loan and also pay regularly occurring expenses, such as rent, food and utilities, causing a cycle of re-borrowing; and
WHEREAS, industry data shows that a typical borrower is stuck in 9 payday loans per year, typically taken out one right after the other; and
WHEREAS, a 2009 study by the Center for Responsible Banking found that over 76% of payday lenders' revenue is generated by loans to borrowers who take out a new loan within two weeks of paying off their last payday loan; and
WHEREAS, post-dated checks and debit authorizations may increase involuntary bank fees for overdrafts and insufficient fund fees charged by the payday lender; and
WHEREAS, the 2011 annual report of Advance America, a payday lender, shows that the company collected over $3 Million in insufficient fund fees and late fees from its own loan customers; and
WHEREAS, Harvard Business School researchers found that payday lending can increase the odds that households will repeatedly overdraft and ultimately have their banks close their checking accounts; and
WHEREAS, the typical payday borrower is indebted to a payday lender for more than 200 days in a...
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