Payday Loan Business Booms Over $1 Billion in Virgina
By J.J. CameronPayday Loan Writer
To say that the Virgina payday loan business is booming would be an understatement.
According to data released by state banking regulators last week, the industry of payday loans in Virgina has surpassed $1 billion. The lending volume jumped 21.5 percent to $1.2 billion, while the number of borrowers climbed 15 percent to almost a half-million individuals in 2005, the state’s Bureau of Financial Institutions said in its annual report of payday loan lenders and check cashers.
In the state, lenders are allowed to charge $15 for every $100 of a quick payday loan, which works out to an annual percentage rate of 390 percent for the typical two-week loan. The maximum amount of a loan is $500; the maximum length of a loan is four weeks.
Data in the Bureau of Financial Institutions’ report are likely to spur efforts already under way to curb or eliminate payday loans in Virginia. The growth of payday loan lending and the financial difficulties of their users have been contentious issues in the General Assembly in recent years.
During the Assembly’s 2006 session, “there was huge pressure on legislators to do something, and the situation hasn’t gotten any better,” said Jay Speer, executive director of the Virginia Poverty Law Center in Richmond and a vocal critic of payday loans. One figure in the report that attracted the attention of consumer advocates was the number of borrowers using more than a dozen payday loans during the year, which climbed 19.4 percent to 90,859 borrowers.
That was one-fifth of the 455,891 total borrowers for 2005. The number only counts borrowers who get their loans from a single payday lender. It probably is understated because many borrowers take out cash loans from more than one lender, said Jean Ann Fox, director of consumer protection at the Consumer Federation of America.
The Community Financial Services Association of America, a trade association in Alexandria for payday loan lenders, said Wednesday that its spokesman was traveling and unavailable for comment on the latest lending data for Virginia. The number of payday loans made throughout Virginia last year rose 16 percent to 3.37 million, while the number of lending locations increased 9 percent to 756, according to the Bureau of Financial Institutions.
According to the state regulators’ report, payday lenders stepped up their efforts to recover unpaid loans last year as losses from uncollectible loans rose 18 percent to $28.5 million. The number of borrowers sued by lenders totaled 9,039, a 31 percent increase from 2004. The Bureau of Financial Institutions, a unit of the State Corporation Commission, began tracking payday cash advance lending activity four years ago after the General Assembly legalized the lending in Virginia.