Payday lending restrictions fail in General Assembly
Sen. Donald McEachin and Del. David Yancey discussed at a press conference Thursday their goal of minimizing payday lending in Virginia despite failed legislation that would have further restricted the practice.
McEachin, a Democrat from Henrico who has sponsored past legislation restricting predatory lending practices, said he was happy to see that many local payday-lending locations had been closed in recent years.
Between 2008 and 2011, payday-lending locations decreased from 769 to 267 in the state. But many former payday lenders are still able to give out loans due to a loophole in Virginia code, said Jay Speer, executive director of Virginia Poverty Law Center.
Companies who wanted to avoid stricter laws on payday lending dropped their licenses and began to offer clients loans without set periods to be repaid, which is not subject to any regulation in Virginia, Speer said.
Yancey, a Republican from Newport News, introduced a bill this session that would have prevented companies from extending credit under an open-end plan at interest rates that exceed the legal rate of
Although Yancey’s bill failed this session, he said he intended to bring it back next year.
Sen. John Miller, D-Newport News, introduced a bill that would have kept payday loans at a maximum annual interest rate of 36 percent. His bill was killed 11-4.
General Assembly members from both parties oppose stricter regulations on payday lending because they think that it is a better solution for borrowers than going to loan sharks on the street, McEachin said.
Another concern is that rewriting the code to restrict open-end lending would group credit card companies into the same category.
Dana Wiggins, a spokeswoman for the Virginia Partnership to Encourage Responsible Lending (VaPerl), said this would not be an issue because most credit card companies were regulated under the federal government.
Wiggins said that VaPerl members were working toward decreasing the number of people who fall victim to predatory loans by offering a list of alternative lenders and advertising these resources online.
These online ads are important because many people seek to borrow money from Internet lenders, which are not licensed to offer payday loans in Virginia, Wiggins said.
It is a class six felony to offer a payday loan without a license, but Speer said the law was not being enforced.
“Other states are enforcing the law, particularly Arkansas, and West Virginia,” he said. “These states are willing to help us.
Yancey said he was concerned about financial literacy in the state, especially among young people, who might be facing unemployment in a difficult economy and thus try to borrow money from predatory lenders.
To help prevent young people from falling into predatory loan traps, Yancey said it was imperative that schools educate students on making smart financial decisions.