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Senate of Pennsylvania
Session of 2013 - 2014 Regular Session


Posted: May 20, 2014 10:41 AM
From: Senator Jake Corman
To: All Senate members
Subject: 90 Day Consumer Loan Program
In the near future, I plan to introduce legislation to codify a 90 day consumer loan program which attempts to copy the widely lauded Better Choice loan program. My goal is to provide all Pennsylvanians access to viable, fair and transparent loan products.

Currently in Pennsylvania, only some consumers actually have access to the Better Choice program. This 90-day loan product was designed by federal regulators and endorsed by the Commonwealth of Pennsylvania to provide a viable alternative to other more damaging short term loan products. While the 90-day product has provided a safe and reliable loan to some, it has failed to reach the entire market. In fact, one estimate has the non-profit credit union industry reaching only one percent of the short term loan market in Pennsylvania. We must provide a safe alternative loan program for the other 99 percent.

My legislation seeks to expand this successful program to any qualified person, business or community group allowing more access to credit for those who need it and qualify. Mirroring the federal guidelines, my bill limits loan products to:

  • 90 day MINIMUM term
  • 28 % interest rate cap, and a
  • $20 application fee

In addition to these federal guidelines, the bill implements comprehensive consumer protections while ensuring equal access to this safe and flexible option. With a real-time, online compliance system, the bill will ensure that lenders are compliant and borrowers are not over-indebted. The Department of Banking shall establish the database fee and the cost differential recovery adjustment fee to ensure a regulated and transparent process and establish the fairest price possible for borrowers.

The bill further protects consumers by expressly prohibiting “rollovers”; requires amortizing payments in substantially equal amounts and prohibits “balloon payments”, and expands access to available consumer credit counseling services and other social services.

As we know, families today rely on financial services more than ever, but those who need access to fair and responsible loans have limited options. Pew Research indicates that many borrowers find themselves obtaining multiple, high-cost loans and getting trapped in a cycle of debt. While this data identifies a devastating circumstance in our state, few are stepping forward to actually fix the problem. By modeling a state regulated loan product after a successful credit union product, Pennsylvania is moving in the right direction to make sure families have access to fair and affordable financial services.