Editorial Criticizes Virginia Payday Advance Ruling
By Paul RizzoPayday Loan Writer
The following is a paraphrased editorial from The Daily Press in Virginia:
The General Assembly had a chance to do the right thing. It had a chance to restrain a predator that is ruining some vulnerable Virginians.
It declined.
A bill that would have tinkered with the payday advance lending industry - and that’s all it would have done, since it was crafted to please the industry - was yanked by its sponsor by the last minute. He took the evasive maneuver after Gov. Tim Kaine indicated he had an inkling to fix the bill’s glaring problems and amend it to do some real good. Kaine might have succeeded, since there seemed to be support on the floors of the House and Senate to take meaningful action.
Rather than let that happen, the bill vanished into the thin air of legislative legerdemain.
And with it the opportunity to address a quick payday loan problem that is a blight on the state.
The General Assembly will have another chance next year. But in the meantime, a lot of people will be hurt. They will continue to get small loans for interest rates that average 386 percent APR - and can reach 782 percent if the loan is for one week.
That’s way beyond the 36 percent limit the state sets for other cash advance loans, and the same ceiling Congress imposed on payday loans to the military. Even if that’s too low to make these small, short-term loans profitable, there was room for a compromise - or a conclusion, like many states have reached, that there’s no need to compromise usury laws to make room for this business.
Contrary to industry claims, for most borrowers a payday loan isn’t a once-in-a-blue-moon fix for a fiscal emergency. If the next year is anything like the last, half a million Virginians will get pay day loans, and the average borrower will take out eight.
Too often, those loans take them farther down the path of monetary misery that led them to a payday lender’s door in the first place. They get one loan to pay off another. They can end up paying much more in interest than they borrowed. As interest mounts, they find it harder to pay off, and dig themselves into a financial hole with a shovel supplied by payday lenders.
Some can’t climb out, and their debt overtakes them.
The fast cash loan industry lobbied hard and showered money on legislators, and the key committees fended off interest rate restraints. They went with a feeble bill that was patently inadequate. It would limit borrowers to three loans - at the same time, for goodness sake. Require a waiting period - one whole day - between paying off one loan and getting another. And set up a database lenders would have to consult to see if an applicant meets those conditions.
Instead of protecting consumers from the get-go, the General Assembly’s solution was to spin a web of less-than-meaningful protections that would kick in only after no faxing payday loan borrowers had taken out multiple loans, and were firmly trapped on the hamster-wheel of consecutive borrowing.
The General Assembly was just playing let’s pretend with consumer protection. A few local legislators deserve credit for standing against that tactic: Sen. Mamie Locke and Dels. Mamye BaCote, Harvey Morgan and Jeion Ward.
There will be another chance next year. Since every House and Senate seat will be on the ballot this fall, this is a good time for citizens to use their ballot-box power to clarify an expectation that legislators will act in the common good, not in the particular good of powerful industries.
