Payday Advances Under Fire in Virginia
By J.J. CameronPayday Loan Writer
Janette Helmick is a member of the Virginia Interfaith Center for Public Policy. She recently wrote the following, paraphrased article for The Free Lancee-Star:
Many of the decisions I make day to day involve a subconscious cost-benefit analysis. Americans, the ultimate consumers, have been taught to evaluate the value of any situation by comparing how much they can get for the least amount expended.
And I'm not just talking about money, although I will admit shopping occasionally at Wal-Mart just because it offers goods for a minimum expense. I'm also referring to our interactions with others - what expense will I pay for making a hurtful comment or lying to a friend?
We measure our success in life by minimizing expense and maximizing return. I think this makes sense in the context of predatory regular and faxless payday loan lenders.
These lenders have reaped enormous profits based on business practices that allow for little expenditures and deep returns on investment.
They're just thinking like a consumer, albeit a greedy one. But at whose expense?
The borrowers of cash loans and car title loans are often left financially bankrupt. After only several loan cycles for either of these types of predatory lending, borrowers realize they've been caught in an inescapable debt trap. Interest rates upward of 350 percent, extra fees, and tacked-on principal make it unlikely that a customer can ever pay back the loan.
Moreover, lenders rarely encourage them to pay it off anyway -their business model feeds on the ability to roll over cash advance loans for the price of mounting interest. They wish to ensnare a borrower for years, one who will faithfully return every two weeks or one month to pay interest and avoid cruel collection practices, repossession of assets, or a hijacked checking account.
They hook desperate borrowers and bleed them dry.
There comes a time when all decisions, business and otherwise, must take into consideration expenses that can't be measured monetarily. Predatory lenders are a huge expense to more than just the borrowers:
Over half of payday loan and car title lenders are owned by out-of-state companies. This means that Virginia's economy suffers as hundreds of thousands of dollars flow out of our borders.
Taxpayers who are able to maintain a level of financial stability pick up the tab for social services necessary to keep victims of predatory, no fax cash loan lenders afloat.
Our tax dollars are also siphoned off by predatory lenders that accept Social Security benefits as income, and help themselves to those government checks. Additionally, responsible business owners are detracted from opening up shop next to a payday or car title lender.
Even a precursory cost benefit analysis shows that this expense is just not worth it. Virginia cannot afford these consequences.
I urge Virginia's state legislators to think more deeply about the dangers of continuing to allow providers of no fax payday loans to exploit Virginia and her citizens. Several responsible bills, like Delegate O'Bannon's proposed repeal of the Payday Loan Act, and Delegate Morgan's legislation that caps car title interest rates at 36 percent, are reasonable and responsible regulations on these harmful industries.
Each and every legislator should support the goal of these bills in the next session. All members of the Virginia General Assembly could arrive at this obvious conclusion by asking themselves one simple question when voting on predatory lending bills:
"At whose expense?"
