Thursday, May 24, 2007

As faxless payday loan lenders have flourished throughout Virginia, they’ve had to fend off opponents from nonprofit groups that advocate for the poor at the General Assembly.

Those groups, like the Virginia Poverty Law Center, try to persuade lawmakers to consider the effects of laws on consumers for a wide range of bills. To counter their influence, personal cash loan and car title lending companies have spent at least $1.4 million on political contributions and lobbyists over the past five years - and that doesn’t include the hard-fought 2007 session.

A new group of religious and nonprofit groups have banded together with businesses to form a coalition called Virginians Against Payday Loans. They will have a chance in 2008 to rally behind a bill to repeal payday lending if state Sen. Marty Williams, R-Newport News, is re-elected.

“Those folks have got their act together,” said Williams, who spoke to the group at its first meeting in Yorktown on Monday.

The group, formed by Newport News business owner Ward Scull, was created specifically to ban payday lending or get the annual interest rate set at 36 percent. The fast payday advance industry, which will be legally forced to charge that percentage to the military this fall, says it can’t survive making loans at this level.

Payday loans charge an average of 368 percent annual interest in Virginia, and car title loans charge even more. Either a person’s future paycheck or vehicle is pledged to secure the loans. Because banks often won’t extend the small loans that these stores make, the industry says, it’s performing a needed service.

A slew of bills during the 2007 General Assembly session to repeal the industry - either outright or functionally by imposing the 36 percent cap - were eventually killed. Then the industry pulled its own compromise bill that would have established a database and allowed consumers to have three loans at a time.

That angered Williams, who was willing to give the industry a chance to compromise before he would be willing vote to repeal. He thinks that the actions of the pay day loan industry represented by the state’s 791 loan stores have put enough lawmakers over the top to kick the industry out of the state.

“I would almost assure them that they’ve got better than a 75 percent chance of being successful,” Williams said of repeal bills possibly succeeding in 2008.

Not including the 2007 session, payday and car title loan companies have paid their lobbyists at least $374,000 in the past three years. The payments are often hard to find because they come from obscure organizations.

Williams says he doesn’t know how many no fax cash advance contributions that he’s returned so far and worries about missing them because he doesn’t recognize the names.

“To the best of my ability, we’ve returned every check,” he said.

Williams returned $500 in February that Cash Advance donated and two other $500 donations from QC Holdings - rare moves in state politics.
But he’s also kept $6,000 in donations from other lenders, including the obscurely named Consumer Lending Alliance and the 409 Group.

The groups that fought the payday cash loans legislation in 2007 were a wide coalition of permanent advocacy groups involved with multiple bills.

The new group was broadened - and is led - by people who are not involved in any other issue.

“They have a broader mandate,” said Scull of the Virginia Partnership to Encourage Responsible Lending. “When we win this, we’re gone.”

Jay Speer of the Virginia Poverty Law Center described at the meeting how he had received calls from companies’ human resources managers. They were getting constant calls from quick payday advance lenders trying to collect on an employee’s delinquent account.

Despite problems that some businesses have with their employees getting trapped, the Virginia Chamber of Commerce has stayed out of the fight. Checksmart, one of the largest lenders in the state, is a member of the chamber.

Because the military is the driving economic force in Hampton Roads, the two local chambers have lobbied against payday advance lending.

Military leaders were able to get a 36 percent cap on lending to service members, but commanders are still worried about the lending. Building coalitions with other mainstream financial organizations won’t be easy.

The state’s traditional financial services businesses have stayed out of the instant cash loan fight.

Some of the same lobbyists representing the credit unions, banks and other financial organizations also represent payday and car title lenders.

Gov. Timothy M. Kaine has said he supports a 36 percent cap. Attorneys general have been some of the strongest drivers of payday loan reform in other states, but the past two in Virginia have been silent on the issue.

The new group hopes to change that and persuade Attorney General Bob McDonnell to join the governor.

The new group doesn’t want to just fight cash advance legislation. It’s working with financial institutions and social service agencies like the Newport News Office of Human Affairs on developing alternatives to payday loans statewide.

Scull has had employees who have struggled with the loans, but Williams said it’s not Scull’s concern as a businessman that drove him to repeatedly lobby for repeal.

“With him, 90 percent of that is just pure compassion,” Williams said.

SOURCE: The Daily-Press

This entry was posted on Thursday, May 24th, 2007 at 2:30 pm and is filed under Virginia.