Tuesday, February 14, 2006

In a surprising turn of events, a bill that would have imposed stronger regulations on payday lenders in Virginia was killed Monday night by its own creator, according to the Hampton Roads (Va.) Daily Press.

Glenn Oder, a Republican from Newport News, struck down his own bill rather than risk it being toughened by a proposed amendment on the Virginia House of Delegates floor. He had promised to do just that if he felt his effort to curb payday loans end up going too far. Bills die often in the General Assembly, but this kind of self-inflicted death is noteworthy.

"It's rare," said Democratic leader Brian Moran, of Fairfax. "It's happened before, but it's rare."

Oder had been working for weeks on what he thought of as a compromise on payday loan industry legislation. Payday cash advances have more than doubled in just the past two years in Virginia. With high interest rates on short-term loans of up to $500, these resources often lead to financial trouble, not relief, among borrowers. Oder was hoping to pass into law:

• Limits on the number of outstanding loans a borrower could have
• A ban on borrowing to pay off payday loans
• The creation of a database to include all payday advances, with frequent inspections from state regulators to identify violations and a fine of $1,000 for each violation.

With the prospects of passage grim, Oder worked out a compromise by dropping the database and inspection provisions in order to get his legislation to the floor. He promised payday industry lobbyists that he would kill his own bill if those stipulations were added on the floor, and that's exactly what happened.

"I feel like I gave my honor," he explained to fellow legislators.

It turns out that the database and inspection policies were precisely what delegates such as Kenneth Alexander, of Norfolk, wanted to add to the bill. So Oder acted as promised and negated his own bill without a single vote being tallied.

"He realized what was going to happen. I was going to win. We have to protect families of low and moderate income, and military families, who are being hit by these predatory lenders. This bill didn't go far enough," Alexander said.

The bill would have discouraged borrowers from taking out payday loans to pay off another, banned lenders from assessing fees for bounced checks, and instituted a no-interest two-month repayment plan for people with several outstanding loans. But delegates say the bill contained no measures to ensure lenders' compliance.

"The bill didn't do enough," complained Kenneth Melvin, of Portsmouth. "I didn't want people to think we cured the evils of payday lending with this bill. We would not have. We'll come back next year to do this right."

Somewhat surprisingly, a payday advance industry lobbyist said he was disappointed the bill was dead.

"These were consumer protections we thought were appropriate, while preserving the industry," said attorney Reginald N. Jones of Williams Mullen, a Richmond law firm.

What happens next year when legislators attempt to bring this issue back to the floor is uncertain, but it will surely be contentious. How far are both sides willing to bend without breaking? As we are seeing with a proposed Illinois payday loan law, it is often hard for legislation, however well-intentioned, to survive the political process.

This entry was posted on Tuesday, February 14th, 2006 at 6:33 pm and is filed under Virginia.