Consumer Protection

Changing the Subject Doesn’t Make Payday Lending in PA a Better Idea

By Mark Price, Third and State

In legislative hearings last month, proponents of a bill to legalize high-interest payday loans tried to change the subject and questioned the motives of some of their constituents. But these attempts don’t alter the fact that allowing payday lending is a bad idea. 

As we’ve explained before — and as the U.S. military, U.S. Congress, and former President George W. Bush have all agreed — payday loans are a debt trap that further impoverishes low-income families, driving more of them into bankruptcy. Pennsylvania should leave in place the strong regulations that make use of payday loans much less common here than nationally.

Here is a bit more detail on what happened at the September 19 Senate Banking and Insurance Committee hearing on House Bill 2191. Chairman Don White raised the issue of credit cards and alleged that the AARP’s opposition to payday lending was motivated by the organization’s desire to protect a credit card product it offers. At another point, Representative Chris Ross, the sponsor of the bill, warned that payday lenders currently selling a limited number of online payday loans illegally may be stealing the identities of consumers. 

Even if this were true, why does it mean we should legalize storefront payday lenders to locate in local communities throughout Pennsylvania and charge 369% annual interest rates on short-term loans? It doesn’t. 

While the strategy of House Bill 2191’s supporters was to talk as little as possible about the dangers payday lending poses for consumers, more telling was who attended the hearings. The hearing room was full of people who had driven in from around the state — Pittsburgh, Allentown, Philadelphia. Pastors, credit counselors and affordable housing groups showed up in opposition to the bill, even though they weren't testifying.  

Their presence didn’t stop some committee members from questioning the motives of an AARP volunteer and rushing the testimony of a pastor of a social service ministry and a military veteran. The only supporters of the bill were the out-of-state companies that stand to benefit financially from these 369% APR loans.

The will of the people — and the editorial boards — on payday lending is clear. Don’t legalize it. Let’s hope that the will of the people outweighs the dollars of the payday lenders in this year’s end game on this issue.


People of almost any age know a lot about the Kennedy administration with its optimistic beginnings and its sudden, tragic end. Yet many have probably never heard of one of JFK's important legacies -- his declaration that consumers have rights that deserve protection.

Fifty years ago, on March 15, 1962, President Kennedy issued his "Special Message to the Congress on Protecting the Consumer Interest." While his ambitious agenda has not been fully realized, the sweep of his vision bears revisiting.

Kennedy said,

If consumers are offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless, if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened, and the national interest suffers.

So, he identified and then called for government action to protect four consumer rights: The right to safety; the right to be informed; the right to choose; and the right to be heard. Other presidents and consumer organizations have added to his work -- proposing rights to consumer education and consumer redress, for example -- but those important additions simply built upon JFK's robust platform.

Kennedy called for enactment of legislation to guarantee the efficacy and safety of prescription drugs and cosmetics because: "Thousands of women have suffered burns and other injuries to the eyes, skin and hair by untested or inadequately tested beauty aids." He called for new food safety rules, which finally passed in 2010.

Above all, Kennedy said, "protection of the public health is not a game."

He called for passage of "truth in lending" legislation to end "serious abuses." He demanded both nutrition and other packaging labeling: "Just as consumers have the right to know what is in their credit contract, so also do they have the right to know what is in the package they buy."

Today, CFPB to possibly end $39 lattes

Would you knowingly agree to pay a $35 fee each time you used your debit card at point of sale, simply to allow you to purchase a $4 latte with only $2 in your account? Even the banks didn't think so, that's why they made “standard overdraft protection” a feature of your checking account that you didn't need to choose. Banks also changed the default switch on debit and ATM cards to allow overdrafts. The combination of these practices, along with the switch from cash to debit card transactions encouraged by rewards programs, made overdraft revenue a major profit center over the last 12 years or so, as the old regulators mostly slept.

At a news conference in NYC today, Director Richard Cordray of the new Consumer Financial Protection Bureau (CFPB) will announce a major investigation of bank overdraft fee practices and propose a model "penalty box" disclosure to appear on bank statements. From Ylan Mui of the Washington Post: "The bureau said it will look into whether banks are reordering customers’ debit-card charges to maximize overdraft fees. Reordering transactions can double or triple penalties, and the practice has been the target of several class-action lawsuits against the nation’s biggest banks. The CFPB’s inquiry also will focus on bank overdraft policies, how they market the plans, and their impact on low-income and young consumers. The agency will solicit feedback from the public."

The Regulatory Accountability Act is a Dangerous Bill that Threatens the Health of Our Children

An opinion piece that appeared in Politico on January 31st, by Senator Pryor and Senator Portman misleadingly paints the Regulatory Accountability Act (RAA/H.R. 3010) as a regulatory savior. This could not be further from the truth. In reality, the RAA would create new hurdles and delays, blocking implementation of an untold number of public health and safety rules. It would add layers of new bureaucratic processes before even simple public health rules could be enforced. It would empower special interests to use the courts to delay protections that have been years in the making.

Two disturbing examples of what RAA will do if enacted: After a 10-year fight, Congress authorized and the Consumer Product Safety Commission developed new safe crib standards. America’s most vulnerable population – infants – finally received protection against collapsing cribs that injured and killed far too many. RAA would make have made it easier for special interests to contest the new crib standards in court, delaying further these critical protections; The new U.S. Environmental Protection Agency’s mercury and air toxics standards, in development for over 20 years would not have been enacted under RAA. Special interest would have asked that these rules be further analyzed by the EPA, causing power plants to keep emitting mercury, a powerful neurotoxin that is very harmful to children and fetuses. Under RAA costs to business will be considered first before public health benefits.

Trouble in Toyland

Holiday shopping season is upon us once again. As a parent, relative, or friend, shopping for toys for the children in your life can be a challenge. 

We don't always know if the gifts will be a hit but the one thing we count on is that the toys we purchase are safe.  Thanks to the hard work of agencies like the Consumer Product Safety Commission (CPSC) and consumer advocates like U.S. PIRG that's largely true.  But as our toy shopping researchers have found, that's not always the case. 
Each year, PennPIRG publishes a report, "Trouble In Toyland," that highlights a sampling of unsafe toys, ones we found in a survey of toy stores across the country. Over the past 25 years, the findings of our report have paid off, leading to more than 100 recalls and millions children's products pulled from store shelves.  The findings also provided valuable evidence in support of the need for a 2008 law that gave the CPSC more authority to crack down on manufacturers and importers of dangerous toys. 
Despite important progress, parents need to be aware of ongoing hazards and be on the lookout for unsafe products. More than 250,000 American children made trips to the emergency room in 2009 due to toy-related injuries. Toy safety should not be a political or partisan issue.  I have yet to hear any policy maker argue 'caveat emptor' (let the buyer beware) as it relates to toddlers.  That is why it is all the more shocking to see new, sweeping attacks in Congress on some of the most basic health and safety protections for young children as well as the broader public. 

Supreme Court Hands Tom Corbett an Enourmous Amount of Power to Protect Pennsylvanians. Will he Use it?

Lost in the shuffle of a couple big decisions of the Supreme Court this week was a Antonin Scalia(!) authored opinion that will give Attorneys General an enourmous amount of power to go after absuvie banks. The NYTimes Editorial lays out how the case came about:

As the current mortgage crisis was building, banks engaged in a wide array of bad practices. They lent to borrowers who could not afford to pay off the loans. They misrepresented loan terms, and they employed deceptive “teaser” rates to mislead their customers.

State attorneys general opened investigations and filed lawsuits. In 2005, then-Attorney General Eliot Spitzer of New York asked several national banks about lending practices to determine whether blacks and Hispanics had been charged higher interest rates than whites — and whether the banks had violated fair lending laws.

The Office of the Comptroller of the Currency, part of the Treasury Department, sued to block Mr. Spitzer. It claimed that a regulation it issued under the National Bank Act barred the states from enforcing state fair-lending laws. Two lower courts agreed.

Basically, Eliot Spitzer saw Bush and Co weren't acting to curb abusive lending. And so, when he tried to do it himself, Bush's regulators sued to stop him. After Spitzer lost, that was pretty much the end of states being able to force national banks to follow their own fair lending laws. Luckily, that decision didn't matter, because we live in a world of perfect markets, with the less regulation the better. So, as a result of that decision, the US was set on a course of happiness, candy canes, and endless prosperity...

But then a crazy thing happened this week. The Supreme Court, with Scalia as the deciding vote, decided Spitzer was right. All of a sudden, Attorneys General all across the Country were back in the business of protecting the residents of their state from national banks.

Which brings to our Attorney General, Tom Corbett. Thus far, at a time of an incredible economic calamities, Corbett has shown little interest in actually protecting consumers in PA, no matter who is causing their suffering. But with this decision, he just lost one more excuse why he cannot be more active.

Corbett wants to be Governor. I hope that he knows that a smart Democrat in 2012 will point to his time as AG, during this once in a generation downfall, and ask him why he didn't stand with ordinary Pennsylvanians.

Something new in the DA race

Yesterday at City Hall, Seth Williams unveiled a policy paper that really makes me proud to support him. You can read it here.

In it, he pledges to use the DA's office to protect consumers against fraud and predatory business practices. He'd use a underutilized tool, the state Unfair Trade Practices and Consumer Protection Law (or "CPL"), which gives the DA the power to levy fines and penalties and ultimately shut down abusive businesses. Potentially, the DA can wield the same regulatory power as the state Attorney General.

This is a big deal. People in neighborhoods all over Philadelphia are victimized by scams and frauds, and only particularly large or widespread problems get the attention of the US Attorney or the State Attorney general, who must deal with severe resource constraints. But the DA is right here, already in these neighborhoods, and the CPL will allow them to quickly respond to problems with relatively low administrative costs (it's a civil tool with a lower burden of proof than a standard criminal fraud prosecution).

The plan also will build important ties between the DA, the community, other branches of government, and nonprofit legal services. There's a legacy of conflict from Lynn Abraham's tenure, which this plan will help wash away.

And since one of the most intractable problems in dealing with crime in Philadelphia is the lack of trust between many communities and law enforcement, this plan can start helping bridge that mistrust. That's crucial.

Mostly I am proud of the vision this plan reflects: justice isn't just retribution, justice is a process. The first line of the plan states,

"There is a clear and compelling link between financial stresses individuals face and crimes that are committed. If the City of Philadelphia is going to reduce crime -- and not just increase arrests and convictions -- it must do more to address the victimization of its residents by abusive business practices that can lead to crime, but ultimately weaken our community."

This is progressive thinking. It's thinking that acknowledges root causes, and sets out to do something about them. It's a vision of the DA's power that is constructive and not merely reactive. And I think it shows a very important humility that has been lacking from the DA for years now: dealing with crime is a difficult process of trying to piece together neighborhoods that are broken. It's a little bit of what Obama invoked in that now-old speech:

For alongside our famous individualism, there's another ingredient in the American saga. A belief that we are connected as one people. If there's a child on the south side of Chicago who can't read, that matters to me, even if it's not my child. If there's a senior citizen somewhere who can't pay for her prescription and has to choose between medicine and the rent, that makes my life poorer, even if it's not my grandmother. If there's an Arab American family being rounded up without benefit of an attorney or due process, that threatens my civil liberties. It's that fundamental belief — I am my brother's keeper, I am my sister's keeper — that makes this country work. It's what allows us to pursue our individual dreams, yet still come together as a single American family. "E pluribus unum." Out of many, one.

And I'm glad there is some of that sensibility being brought into this election.

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