Thursday, July 5, 2007

Governor Timothy M. Kaine (pictured) renewed his call for tighter controls on the controversial payday cash advance lending industry Tuesday, but he stopped short of supporting specific reforms.

Speaking at a ceremony to mark the passage of tax-relief legislation, Kaine said the state must do more to help the working poor. The Daily Press had the story.

To that end, he said he would either propose or support additional restrictions on payday loan lenders.

“I just really have it on my heart that people shouldn’t take advantage of people who are poor,” he said.

Earlier this year, lawmakers, industry representatives and consumer advocates could not agree on a reform bill aimed at the short-term, high-interest bad credit payday loans.

A payday loan costs $15 for every $100 borrowed. The maximum loan amount is $500, and the typical term is one or two weeks. If renewed for a year, as is done in some cases, interest rates hit 390 percent.

Industry leaders say payday loans offer quick cash to people who need it in an emergency. While they admit that some people misuse the service, they say most of their customers exercise restraint.

Critics say faxless payday loans trap people into a cycle of debt.

They also accuse the industry of preying on the working poor. One measure backed by opponents would have capped interest rates at an annual rate of 36 percent. Payday lenders say they are willing to discuss changes to the rules, but a 36 percent cap would effectively force them out of business.

On Tuesday, one organization that has railed against the fast cash loans said it would continue to push for the 36 percent limit.

“Thirty-six percent is the middle ground,” said Ann Rasmussen, policy director of the Virginia Interfaith Center for Public Policy.

However, Kaine said he did not think a 36 percent cap would get through the legislature. Instead, he wants to forge a different compromise.

Likewise, one lawmaker who led the fight for reform said she wanted to find middle ground, perhaps by limiting the number of cash advance loans per year, plus other measures.

“The ultimate goal is to break the repeat borrower cycle,” said Del. Jennifer McClellan, D-Richmond.

This entry was posted on Thursday, July 5th, 2007 at 5:42 am and is filed under Virginia.