Virginia Payday Loan Bill Withdrawn
By Paul RizzoPayday Loan Writer
The sponsor of a House of Delegates bill to reform the Virginia payday loan industry withdrew his bill Tuesday, three days after it was amended to drastically slash the interest rate lenders could charge.
Del. Lee Ware, R-Powhatan, asked his colleagues to strike the bill from the calendar on the final day for the House to act on its own bills. Another payday lending reform bill has passed the Senate and will be considered by the House.
Ware objected to the amendment to cap the interest rate on the short-term payday loans. Industry representatives agreed, saying that 72 percent cap would put them out of business.
Ware’s bill would have created a database to track payday loans, while restricting the number of loans that a borrower could have at one time, among other provisions.
“We would have had the strongest restrictions on payday loans of any state in the country,” Ware told delegates, saying Virginia could have had “genuine reform rather than backdoor abolition.”
Industry opponents have said providers of payday advance loans charge what amounts to an annual interest rate pushing 390 percent for a two-week loan. Ware argued that comparing the $15 charged for a $100 loan to an annual interest rate when no other fees are charged is misleading.
A 72 percent cap “sounds great … much more reasonable than the astronomical figures that are often quoted as a way of clouding the issue rather than dealing with the actual fiscal reality,” Ware said.
Payday cash advances allow a borrower to write a check for the principal plus a fee. The company holds the check until the customer’s next payday, when he or she either pays off the loan or the lender cashes the check. Opponents argue that the majority of borrowers take out loans from one lender to pay off another, spiraling into a cycle of debt.
In 2005, 445,000 customers took out more than 3.3 million payday loans, according to industry figures.
A 72 percent interest rate cap would have meant check cash advance lenders could charge about $2.77 for a $100 loan, comparable to the amount many automated teller machines charge for withdrawing a customer’s own money.
“Somehow we’re expected to be able to loan $100 for the same amount,” said Jamie Fulmer, investor relations director for Advance America, Cash Advance Centers Inc., the nation’s largest payday lender. “Banks have an ATM fee that has no risk. We’re taking risk in making these advances.”
Fulmer called the amendment industry prohibition in disguise.
“We’ve all along supported reform, reasonable reform that continues to protect consumers, not only in their ability to use the product but also to protect the small number of folks who misuse the product,” Fulmer said.
The industry brought forth many of the reform measures:
- The database
- Limiting the number of personal loans out at one time to three
- A 24-hour cooling-off period between loans and allowing those with three loans to have 60 days to pay them off
“It’s like a kid that gets upset that the game’s not going his way and he takes the basketball so no one can play,” said Helen O’Beirne, a spokeswoman for the Virginia Partnership to Encourage Responsible Lending, a coalition of 25 business, faith and civic organizations who oppose the industry.
O’Beirne said even though the Senate version still is alive she doesn’t believe the Legislature will pass instant cash loan reforms this year.
“I think the House has made their intentions clear to tighten the bill, and I think the industry’s too scared to let that happen,” she said. “They came in and they acknowledged it’s a problem and now they’re leaving us high and dry.”
