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Payday Lending Pennsylvania
Pennsylvania has several laws which come into play, the Consumer Discount Company Act (CDCA), codified at 7.P.S §§ 6201—6219 and the Loan Interest Protection Law (LIPL), codified at 41 P.S. §§ 101-605.
While the laws actually have to be read in details as they are complex, in a nutshell, the CDCA requires companies lending less than $25,000 to be licensed. 7 P.S. § 6203.A. Licensed companies may charge interest at a rate in excess of the statutory maximum of 6%. 7 P.S. § 6213.E and § 6217.1A. However, unlicensed companies making loans under $50,000 cannot charge more than 6% under the LIPL, 41 P.S. § 201. The borrower is not required to pay interest over and above the statutory rate if the company is unlicensed. 41 P.S. § 501.
So payday loans are legal in Pennsylvania to the extent that the lender is either licensed and makes a loan of less than $25,000 under the CDCA OR the lender is unlicensed and caps interest at the maximum 6% rate specified in the LIPL.
What is good about this is that most payday lenders do not want to be licensed and do not want to cap their interest rates at 6%. While such companies can prey on consumers, if they fail to comply with these requirements, they cannot sue as it would subject them to criminal prosecution, LIPL, 41 P.S. § 505 and CDCA 7 P.S. § 6218, as well as a civil suit by the attorney general, LIPL, 41 P.S. § 506 or individual borrower, LIPL, 41 P.S. § 504. An individual can recover attorney fees. LIPL, 41 P.S. §§ 503-504.
Copyright (c) 2012 by Rachel Lea Hunter
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