ACE Cash Express is the nation's second largest payday lender, but customers who want a financial lifeline until their next paycheck won't get help in any of its 19 Pittsburgh-area stores.
Payday loans are illegal in Pennsylvania, and that has limited Ace to cashing checks, selling money orders and processing bill payments for its customers, among other services.
But the restrictions on a potential cash-cow for a business such as ACE could change because of renewed efforts by the industry to legalize payday lending in Pennsylvania. It mirrors a push elsewhere in the country to allow loans that critics say take advantage of needy consumers.
A bill remains in the state Senate that could legalize payday loans in Pennsylvania that critics say would allow annual interest rates as high as 300 percent. The bill follows a similar one that passed the state House in 2012.
“We've seen nationally since 2005 that payday lenders have continued their push to bring back these loans, ” said Diane Standaert, senior legislative counsel at the Center for Responsible Lending, a nonprofit in Durham, N.C., that opposes payday loans. “There have been a lot of efforts in the states, and they are continually rejected.”
Pennsylvania has an anti-payday lending law and a 2010 state Supreme Court decision backed it up. The law caps interest rates on short-term loans at 24 percent.
Critics say the high-rate lending practices most often gouge lower-income wage earners with double- or even triple-digit interest rates and keep consumers in debt. Legalizing payday lending is opposed by veterans, seniors and faith groups in the state.
The move to make these high-interest loans legal happens as some payday lenders have circumvented state prohibitions by using the Internet to solicit borrowers — an issue that is drawing the attention of regulators and legislators.
State Rep. Chris Ross, R-Kennett Square, a supporter of efforts to legalize payday loans in Pennsylvania, points to the flood of solicitations by online payday lenders in television ads and on the Internet as a reason why lawmakers remove the ban in Pennsylvania. Legalizing the business, he says, would allow state oversight and provide better protections for consumers.
“I believe there is a need for a properly structured, short-term lending in Pennsylvania, ” said Ross, who sponsored two bills to legalize and regulate loans that passed the state House in 2012 and 2004, but not the Senate. “We've got the Internet, for which there is no effective means of regulation to protect consumers.”
Ed Novak, spokesman for the state Department of Banking and Insurance, said tracking down Internet lenders is “like trying to nail Jell-O to the wall, but when we do find it, we take all measures we can to protect consumers.” Even so, Novak said the department is not seeing much activity. “We made sure some of the companies got the message, ” he said.
Payday loans in Australia are part of the small loans market, which was estimated in 2008 to be between $800m and $1bn a year, although it seems likely that the true market was and currently is higher than this.
The growth of this market mirrors the growth in Canada, the United Kingdom, and the United States. Because the market for small loans...
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