The payday Trojan horse
By Joseph Sabino Mistick
Published: Saturday, June 15, 2013, 9:00 p.m.
The tale of the Trojan horse, and the trickery it symbolizes, provides a dead-on example of the most recent efforts to legalize payday lending in Pennsylvania, led by a number of Republican state senators this time around.
During the Trojan War, the Greeks built a giant horse, filled it with soldiers and bamboozled the Trojans into thinking it was an abandoned tribute to the Goddess Athena. The Trojans took it within their walls. When Greek soldiers emerged that night, they opened the city gates to their army and Troy was sacked.
The Senate version of payday lending is a lot like that, recently reintroduced as a prettied-up alternative to a similar House bill that went nowhere last year. Then, as now, payday lending was opposed by numerous groups that represent Pennsylvanians who struggle from paycheck to paycheck.
This time, in its latest Senate version, predatory payday lending is being called a “micro-loan program.” This must not be confused with real micro loans, which help small startup businesses that are often women- or minority-owned.
The content of this legislation is dangerous to poor communities and struggling families. After finance charges, the annual cost of these loans can exceed 300 percent. As many as eight two-week loans can be made, each within days of repayment of the last loan, and there is even a loophole for that, providing too strong a temptation when paychecks fall short of the cost of living.
Most draconian, the lender can require direct access to the borrower's personal bank accounts. This means that lenders will get paid first by simply taking your money, before the landlord and the utility company are paid, before you can buy food or shoes or medicine for your kids.
And our nation's military seems to be at considerable risk from payday lenders. In 2006, Congress asked the Department of Defense to study the effect of payday lenders that were clustered around military bases.
Citing the vulnerability of “young and inexperienced borrowers,” the Pentagon concluded that “predatory lending undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all-volunteer fighting force.”
Since before the Code of Hammurabi, the allowable interest on debt has been regulated by civilized societies. And states have enacted usury laws to discourage loan sharks and the vigorish they charge, those unconscionable interest rates.
Even Jesus of Nazareth had enough, throwing the usurious money changers out of the temple, earning a pretty good reputation as a man of the people. It is hard to believe that any state senator or representative would want to be known for inviting modern money changers to do business in the commonwealth.
Joseph Sabino Mistick, a lawyer, law professor and political analyst, lives in Squirrel Hill (SabinoMistick@aol.com).
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