Tuesday, January 30, 2007

The consumer lending and finance industry last year alone contributed $400,000 to state lawmakers - the bulk went to lawmakers serving on the committees that control the fate of check cash advance lenders.

No wonder then - The Roanoke Times argues - that state senators shamefully ignored evidence that these loans pose an extreme hardship to cash-strapped Virginians.

Members of the Senate’s Commerce and Labor Committee– which includes Roanoke’s John Edwards –received $120,132 from finance companies since 2004, according to the Virginia Public Access Project.

So it should surprise no one that they canned bills that favored consumers over predatory, no fax payday advance lenders.

The full Senate last week passed a payday lending bill that is the equivalent of using a feather duster instead of undiluted bleach to scrub the indelible stain left by the loan-shark industry the General Assembly legalized in 2001.

The senators know payday lenders need some restraints. They certainly heard enough testimonials from borrowers and previous fast payday loan officers that the system sucks people into a cycle of deepening debt. Surely they had information from the Virginia Bureau of Financial Institutions that reports the average interest rate is 386 percent but it can - and has - reached more than 1,000 percent.

If senators still didn’t feel compelled to repeal a law that sanctions usury, they could have at the very least capped the interest rate at 72 percent - twice the legal limit for other types of loans.

But they weren’t even willing to grant that small concession to protect consumers.

Instead, they voted for a bill that industry favored and does little but limit a borrower to juggling three of these payday cash loans at the same time. Nothing in the law prevents lenders from charging them an additional fee of $15 per $100 borrowed every two weeks to keep rolling over the loans.

The industry claims it fills a need by extending credit to people who can’t obtain it elsewhere. With good reason: They can’t afford it.

There is some hope, although slim, that the House will act in consumers’ interest despite the $107,000 the industry has given in the last two years to committee members.

Sen. Walter A. Stosch - author of the 2001 bill that sanctioned payday loans and the largest recipient of the industry’s donations - was one of just two senators voting against the payday cash advance industry this time.

Stosch has since come to rue his legislation. It’s only a matter of time before regret catches up to the others.

This entry was posted on Tuesday, January 30th, 2007 at 12:42 pm and is filed under Virginia.