Mark Winston Griffith

Good (and bad) News on the Predatory Lending Front

Score one for the good guys, one for the bad.

First, the unhappy news: A blog on the Progressive Legislative Action Network reported that Wisconsin Governor Jim Doyle may be willing to sign a bill, recently passed by the conservative Wisconsin legislature, that would make it easier for rent-to-own stores to do business in Wisconsin.

Now the happy news. Last week the Pittsburgh Post-Gazette reported:

"Payday lenders, the providers of high-priced short-term loans for people desperate for cash, are on the ropes in Pennsylvania. In recent weeks, two of the biggest payday lenders have said they are exiting the business in the state. Advance America, which has more than two dozen locations in this region and is the largest payday lender in Pennsylvania, plans to stop making new payday loans after tomorrow. Ace Cash Express, with almost two dozen stores in the area, has set June 30 as the deadline for halting payday loans, so-called because borrowers promise to repay the money out of their next paycheck."

Apparently business started to fall off for payday lenders in Pennsylvania ever since the Federal Deposit Insurance Corporation (FDIC) last March placed limits on pay day loan "flipping", the practice of setting a new loan term and additional fees when a borrower can't repay the first time around. Some researchers estimate that the typical pay day loan is flipped eight times, with fees often exceeding the original amount of the loan.

In other words, payday lending in Pennsylvania, at least in its current form, could be headed for extinction.

Right now payday lending - unlike rent-to-own lending - is illegal in New York.

Mark Winston Griffith: Author Bio | Other Posts
Posted at 9:39 AM, Mar 31, 2006 in Banking | Financial Justice
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