June 5, 2013


The Urban Affairs Coalition promotes financial literacy for community members of Philadelphia and wants Philadelphians to know the importance of avoiding predatory payday loans. This is an important bi-partisan issue that will impact Pennsylvania and target some of its most vulnerable citizens. Senator Pat A. Browne recently introduced legislation regarding high-cost, short-term loans. With an approval vote of 8-6 from the Senate Banking and Insurance Committee, the bill is now to be brought up for a vote by the full Senate next week.

Pennsylvania is one of the leading states that support low-income communities and have upheld strict legislation in order to protect them.  Senator Browne’s proposal for the Micro-Loan Program is supposed to be a solution to help families build their credit history, however the format is similar to payday loans. Micro-loans will offer an extended payback period unlike payday loans but the renewal period will continue a repeated cycle of borrowing.  After eight consecutive loans, borrowers are offered longer-term loans creating a financial dependency. Instead of borrowers learning to make better financial decisions, they rely on loans to cover their debt.

A study conducted by the Consumer Financial Protection Bureau (CFPB) revealed that the loans kept individuals trapped in a repeated cycle of borrowing rather than gaining financial freedom and independence. In addition to CFPB, The Pew Charitable Trust showed that 58% of payday loan borrowers have trouble meeting monthly expenses and use these loans to cover routine bill payments.

If individuals are in a financial crisis, the best solution is to seek guidance. UAC’s Community Economic Development (CED) department offers financial education workshops to help families make better money management decisions and to provide them with an opportunity to climb out of debt and achieve financial success. These loans exploit the community’s most vulnerable residents and take advantage of a dire financial situation. UAC has been actively speaking with Community Legal Service’s attorney, Kerry Smith, to address this issue and has sent a letter to Pennsylvania’s legislators urging them to understand the financial harm these loans will cause. Even though the bill has been passed by the Senate Banking and Insurance Committee, Philadelphia residents can still make their concerns heard and talk to Pennsylvania’s legislators to reconsider this serious matter.

To read the full report by the Consumer Financial Protection Bureau click here.  To view UAC’s letter to Pennsylvania’s legislators click here.