Why Senate Bill 975 is Good News for Philadelphia’s Disadvantaged

When you think of Philadelphia, images of wide open spaces, chic downtown suburbs and the Flyers spring to mind… and possibly some mouth-watering cheesesteak.

Certainly, a sense of affluence comes with the 5th largest city in the US. Sadly, this belies a troubling and deep-rooted poverty which bubbles just underneath Philadelphia.

A sad fact which mars this otherwise great city, and one which isn’t given much press, is that out of the top ten most populous cities, Philly has the highest rate of residents whose income is below half of the poverty line.

“Deep poverty” is defined as a single person living at or below $5,700 a year. Half of the poverty line for a family of four is around $11,700.

If these numbers seem shocking – and they should – here’s something that is even more disturbing: 12.9% of Philadephia’s residents are trying to get by with these kinds of income. That equates to around 200,000 trapped in the black hole of deep poverty.

The standard poverty rate in Philadelphia (set in 2012 at $23,050 a year for a family of four) is also the highest of any large US city, currently at a whopping 28.4%.

The statistics on Philadelphia’s impoverished don’t actually include help given via food stamps to those below the poverty line. Worryingly, the proposed federal budget is making a move to cut food stamp expenditure to the tune of billions of dollars; naturally, this is a huge worry for households in Philadelphia which rely on this welfare for such basics as putting food on the table.

What the outcome of that decision will be remains to be seen, but there has been at least some good news for Philly residents to come out of the state Senate this month.

Access to Affordable, Safe Credit

In early June, the State Senate Banking and Insurance Subcommitte passed Senate Bill 975. In short, the bill aims to give Philadelphia greater access to emergency credit in the currently clamped-down city. Rather than what is seen as a ‘weakening’ of payday loan laws, however, SB 975 is designed to greater regulate the credit market while offering a more diverse range of options to suit individuals. According to the bill’s author, Senator Patrick Browne: “This legislation is designed to put in place comprehensive consumer protections while ensuring access to more affordable, safe and flexible credit options for all Pennsylvanians.”

Putting the Bill in Context

It’s important to note that the type of loans at the center of the vote are designed for the extremely short term; specifically, the bill centers around 14-day loans. These micro loans are branded exactly for purpose – to help those in sudden financial distress get through a tricky couple of weeks before the next pay check arrives.

While much scorn has been poured on the annual percentage rate of micro loans, this is usually taken out of context. Firstly, the APR itself will be tightly regulated under state law at a maximum of 300 per cent. Secondly, while this upper limit sounds outrageous when applied to long term loans, a potentially life-saving micro loan of $500 would only accrue around $57 of interest on the short term it is designed for. While higher than the average fee for conventional long-term loans, this is a reasonable interest rate given the immediate nature and risk on the lender’s part of micro loans.

Going Forward

The bill is set to be a positive source in a city where too many people are forced to choose between near-starvation before the next pay check comes in and resorting to illegal borrowing from sharks. While we hope to see more regulation introduced into the bill, as well as a clearing up of any ambiguous language within it, the 8 to 6 vote earlier this month is certainly the first step in the right direction.