A quick fix in an emergency or a predatory loan? Whatever you think of so-called "payday lenders," they could be coming back to Pennsylvania.
A state Senate hearing Wednesday considered whether to bring the industry back to the Keystone State.
It used to be a common sight in Pennsylvania: storefronts offering so-called "payday loans" to people needing quick cash.
"There is a huge demand for short-term loans," said Nathan Groff, of Veritec Solutions, a company that helps states regulate payday loans.
But that quick cash comes at a cost. Over a year, the interest can add to almost 400%. That's why Pennsylvania essentially banned the industry several years ago by limiting short-term loans to just 24% interest per year. Payday lenders quickly left the state.
"We banned it because we were effective at convincing the state legislature that this is an awful financial product," said Alan Jennings, with the Community Action Committee of the Lehigh Valley, a low-income advocacy group.
But now that unregulated lenders have popped up online, Harrisburg is thinking of bringing payday lending back -- with new protections.
"It is already easy to take out a payday loan in Pennsylvania because all you have to do is pick up the telephone or go on the computer," said Pa. Rep. Chris Ross, R-Chester Co., the bill's sponsor.
The proposal would let lenders go back to charging whatever they want in interest, but finance charges would be capped at 12.5%. Also, if you can't pay the loan back right away, lenders would have to offer you a long-term repayment plan.
The bill also bans people from taking out one loan to pay off another, often called "rollover loans."
"It's very likely that the people who take out these loans roll them over, and get stuck in an ongoing pattern of payments that they can't keep up with," said Jennings.
But are online lenders even a problem? A recent Pew Charitable Trust study said no. It found, in areas without payday lending stores, only 5% of would-be borrowers went online instead. Many of the rest opted to not borrow at all.
That has at least one area lawmaker concerned.
"Maybe [bringing lenders back] will encourage more people to go into debt," said Pa. Sen. Lisa Boscola, D-Lehigh/Monroe/Northampton counties. "That's what I'm really afraid of."
Some 60 groups are opposing this bill, including the powerful seniors' group, AARP. But it's already passed the state House, and even critics admit it has a good shot in the Senate.