Developing Alternatives to Virginia Payday Loans
By Paul RizzoPayday Loan Writer
Ward Scull, a Newport News resident, and Mike Lane, a Gloucester resident and former deputy commissioner of U.S. Customs, are co-founders of Virginians Against Payday Loans (VAPL). They wrote the following to the Virginia Daily Press:
For decades now the gap between the rich and poor in America has been growing. And this widening chasm between classes has resulted in another glaring gap - the deficit between those individuals with access to reputable financial services and those who have had the door slammed shut on mainstream financial options.
Predatory no fax payday loan lending has sprung up as one of the grimmest alternatives to address the needs of Virginia’s working poor.
The high risk typically attributed to lower-income borrowers has resulted in a much more costly product, if one is available at all, for the bottom sector of consumers. However, the notion that “the poor pay more” has breached the boundary of fairness and crossed into the realm of exploitation. Payday lending is one of the newest variations of price gouging of our economically vulnerable neighbors.
Fast payday advance lenders, who can legally charge up to a 782 annual percentage rate in Virginia, entrap borrowers with few viable financial alternatives and limited financial education into cycles of inescapable debt. This product, or “service” as industry proponents would have the public and policy makers believe, is dramatically different from loans offered to more affluent consumers.
Many Virginians have found these business practices, especially the triple-digit interest rates and the debt trap, to be nothing less than extortionate.
And some have begun to respond.
Virginians Against Payday Loans is already making significant headway by adding the expertise and authority of many concerned powerbrokers across our commonwealth. VAPL is comprised of a growing number of people and organizations with a multitude of talents: from concerned individuals, financial institutions, faith-based organizations, consumer advocacy groups, to the business community, and other partner organizations already working on the issue, like the Virginia Partnership to Encourage Responsible Lending (VaPERL), with whom VAPL works closely and strategically.
Our goals are simple:
- Repeal the law allowing pay day loan lending by exempting them from basic consumer protections or, at a minimum, amend the Payday Loan Act to include a 36 percent annual interest rate cap that would result in the full removal of the debt trap.
- Develop and provide viable financial alternatives to cash loans for lower-income Virginians who find themselves in need of short-term small denomination loans.
- Achieve financial literacy through education for those most likely to be payday borrowers.
VAPL hopes to achieve these goals by developing and implementing a plan of action for each.
Policy Reform: We have already begun working with allies in the General Assembly to draft and submit repeal and rate-cap bills. VAPL will also work to educate other legislators. A lobbyist or team of lobbyists will join with supportive local organizations and Virginia citizens to demand action by their representatives in the state legislature regarding supposedly cheap payday loans.
Financial Alternatives: There is an immediate need to address the substantive problem of those without access to financial services, often referred to as the “unbanked” or “underbanked.” Financial institutions are increasingly aware of the need to service this community of potential customers and are beginning to address it.
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