Edwards, D-21st District, has served in the Virginia Senate since 1996, and represents the city of Roanoke, Craig and Giles counties and parts of Montgomery, Pulaski and Roanoke counties. Ware, D-11th District, has served in the Virginia House of Delegates since 2004, represents parts of Roanoke and Roanoke County.

This is their opinion piece on Virginia payday loans, written for The Roankoke Times …

There was a lot of hype about payday lending in this legislative session. We heard stories of abuses where some borrowers had taken out six or seven payday loans at a time and had fallen into a “cycle of debt,” from which they could not recover.

At the same time, we heard stories from individuals who credited the availability of a payday loan with solving an acute financial problem.

Clearly, the payday loan industry needs reforming. But individuals facing a short-term financial crisis need some assistance, and traditional lending sources may not be available for these people.

Many families who live paycheck to paycheck sometimes need a little extra help with financial emergencies. A small [bad credit cash loan] can help repair a car to drive to work, pay an electric bill on time or fix an emergency plumbing problem.

A payday loan is a way a person can get a few hundred dollars on short notice with no credit check and few hassles. Only a bank account and a regular income source are required for a loan up to $500.

Even those who are fighting the payday lending industry admit there is a “niche market” for [no faxing payday loans]. These lenders serve a segment of society who cannot, for many reasons, qualify for traditional loans.

The reform legislation that was proposed in the General Assembly this year would have improved the industry and better protected borrowers.

Senate Bill 1014 would have required the lender to check a database to ensure that an applicant for a loan up to $500 had no more than three payday loans outstanding at one time. No loan could have been “rolled over,” and a borrower would not have been able to take out another payday loan on the same day that the borrower paid off the existing loan.

If a borrower obtained three or more consecutive payday loans (within five days of each other), the borrower would have been entitled to receive an extended payment plan to repay the [cash advance] over a period of 60 days without added charges.

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The bad news: Predatory payday lending is still alive in Virginia, at least until our next General Assembly session. Every year this problem goes unaddressed, payday cash advance lenders strip $160 million in excessive fees from the paychecks of hardworking Virginians.

The good news: People are getting it. Gov. Timothy Kaine gets it. He publicly declared his intention to impose a limit on the amount of interest payday lenders could charge.

Members of the House of Delegates get it. They passed an interest rate cap of 72 percent for payday loans - still twice the normal usury limit for Virginia’s small loan companies, but a much more reasonable rate than the 400 percent payday lenders typically charge.

And the general public gets it. Concerned citizens from across the commonwealth continue to voice their discontent over the exploits of payday lending. Faith groups call it usury, moral outrage. The business community is ashamed to be associated with payday lenders. Labor leaders decry the maltreatment of their members.

This issue is not going away. Including Virginia, legislators in at least 13 states have introduced legislation this year that would place similar interest rate caps on bad credit cash loans and car title loans to all their citizens. Virginia’s General Assembly was the first legislature to consider such a measure in 2007, and could have been the first to enact the law, providing true leadership in a movement that continues to grow across the country.

But the payday industry hijacked the process, using a slick public relations campaign and lobbying blitz to push its own idea of “reform.”

There was a reason they were so willing to accept these so-called reform measures - each had been tried in other states, and each had failed to stop the abuses. In other words, the payday advance loan lending industry’s version of reform was a package of half measures that, at the end of the day, would allow them to conduct business as usual - debt trap and all.

When it became clear that the industry was never interested in real reform that addressed the abusive aspects of payday lending, Kaine called their bluff and announced his objective to amend the bill when it reached him by adding an annual interest rate cap of 36 percent. If it’s good enough for military families, its good enough for all Virginians, the governor told the press.

The payday cash loan industry killed the bill rather than agree to this cap.

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Bernestine Thomas was having a rough month.

A few years ago, the 52-year-old Lynchburg General Hospital employee was having some financial problems. Her daughter Barbara was in between jobs and her car kept breaking down.

In order to take care of her family and pay her bills, Thomas, who lives in the White Rock community, decided to visit a payday loan facility.

“I went to them a couple of times to borrow some money,” she said.

That decision is still present on her credit report today.

“It’s legalized loan-sharking; that’s what I call it,” she said.

Payday cash advance lending caused quite a stir in the General Assembly this year. Legislators proposed 11 separate bills trying to come up with a way to regulate the industry, and none of them passed.

The question was how far does the commonwealth go to regulate the industry. Does it repeal the Payday Loan Act of 2002, cap interest rates at 36 percent or set up a computer system to track consumers’ movements?

The Payday Loan Act authorized payday lending companies to set up shop in Virginia and exempted the industry from the prior 36-percent interest rate cap. The industry says the cash advance loans helps people like Thomas who are strapped for cash.

Opponents say the loans’ interest rates are exorbitant and put additional pressure on the consumer.

For the past five years, payday lenders have popped up everywhere around Virginia. Most of the payday cash loan lenders in Central Virginia are concentrated in Madison Heights and on Timberlake Road, Fort Avenue and Wards Road in Lynchburg.

After the General Assembly passed the Payday Loan Act of 2002, 49 payday lenders were open by the end of the year and around 124,362 payday loans were made that year.

As of Dec. 31, 2006, the Bureau of Financial Institutions, which regulates payday lenders, oversees 84 payday lenders operating 791 offices and 301 check cashers in the state.

The bureau doesn’t have the number of loans made in 2006 available to the public yet. In 2005, however, 445,891 loans were made.

Virginia Poverty Law Center Executive Director Jay Speer said the typical payday-lending customer lives in a low income or a minority neighborhood.

“They target minority neighborhoods,” he said. “Anyone who has trouble making ends meet is a likely customer. If you’re supporting a family on $20,000, that isn’t a lot of money.”

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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.

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Efforts to place modest reforms on the Virginia payday loan lending industry died Saturday when negotiations broke down in the General Assembly’s final hours.

Sen. Richard Saslaw, D-Fairfax, said industry representatives, consumer advocates and Gov. Timothy M. Kaine couldn’t agree on restrictions that would protect those who use the short-term, high interest loans without putting payday lenders out of business.

Saslaw’s industry-backed bill would have placed limits on the number of loans individuals could have at one time and required lenders to give overextended borrowers more time to pay.

Legislators voted earlier in the week to send Kaine the bill, but reneged for fear that he would place on it annual interest rate caps. Instead, House and Senate “conferees” tried to work out differences before lawmakers adjourned on Saturday.

Whether an agreement was in sight depended upon whom you asked.

“If we had more time we could have reached an agreement,” said Reggie Jones, a lobbyist for the cash advance online industry. “I feel like we were so close.”

Payday loan lending opponents claimed the industry was unwilling to accept “real reforms,” such as an interest rate cap or a limit on the number of loans individuals could have each year.

“We want to protect people and they want to protect profits, and that seems to be the sticking point,” said the Rev. C. Douglas Smith, a member of the Virginia Partnership to Encourage Responsible Lending, a coalition of 25 faith, business and civic groups that oppose the use of online payday loans.

Both sides said they were disappointed that nothing was accomplished. The session started with more than a dozen bills to either reform the industry or repeal the 2002 law that allowed payday lenders to charge more than 36 percent interest.

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Governor Tim Kaine said today he would make “significant changes” to a package of Virginia payday loan lending industry reforms if the bill comes to him.

The House passed the bill last week. Now the Senate must either agree to changes made in the House, sending the bill to Kaine, or reject the amendments - forcing negotiations between House and Senate members.

Kaine told reporters that he would “make some significant changes to that bill.”

The measure would create a statewide database to track no fax payday loans and limit borrowers to three at one time. Borrowers would have to wait 24 hours before taking out a loan after paying off another, and those who’ve taken out four consecutive loans could enter into a 60-day extended payment plan, during which time they could not take out another loan.

The House version requires payday advance loan lenders to automatically offer the extended payment plan to borrowers who had two other loans within the past year.

Congress capped the annual interest rate on payday loans to military personnel at 36 percent. Kaine says there shouldn’t be two different interest rates for fast cash loans in Virginia.

The House of Delegates passed a package of payday advance lending reforms today, even as opponents argued it still doesn’t do enough to keep borrowers from falling into a cycle of debt.

The bill would create a statewide database to keep track of Virginia payday loans and limit borrowers to three at one time. Individuals would have to wait 24 hours before taking out a loan after paying off another, and overextended borrowers could enter into 60-day extended payment plans, during which time they could not take out another loan.

The Senate must agree to changes made in the House to further protect instant cash loan borrowers before the bill can be sent to the governor.

Governor Kaine wants to limit the annual interest rate lenders can charge. Supporters have said caps would put the state’s nearly 800 payday lending stores out of business.

Gov. Timothy M. Kaine (pictured) is now personally involved in efforts to clamp down on the regular and online payday advance industry.

With time running out for a deal, Kaine met privately yesterday with Reginald N. Jones, lead lobbyist for the lenders, amid indications they may want assurances Kaine will not seek tougher reforms if a bill reaches his desk.

Kaine, however, favors an interest-rate cap - opposed by lenders as a veiled effort to put them out of business because it would make it unprofitable to offer unsecured payday cash loans up to the legal limit of $500.

Kaine also might support restrictions on the number of loans Virginians annually can take out from money stores. Currently, there are no limits, though industry critics suggest borrowers carry no more than nine.

“The governor believes there should be some reasonable new protections for consumers,” spokesman Kevin Hall said. “He has felt, for some time, that the . . . removal of the interest cap was a very bad policy decision.”

After his session with Kaine, Jones declined to comment.

But before the meeting, Jones said it would not be wise to limit Virginia payday loans because it could drive borrowers to unregulated lenders, such as those operating on the Internet.

He said the industry might consider more lenient terms for borrowers to begin extended-payment plans for erasing overdue loans that, for some, carry triple-digit interest and take months or years to repay.

Facing stiff resistance in the House of Delegates, which favors a 72 percent interest cap, quick cash advance lenders for the first time began direct negotiations with their foes last week.

Del. Jennifer L. McClellan, D-Richmond, told The Associated Press reform efforts might fail if a compromise is not reached today, when a House committee could vote on the remaining lending bill.

Click here to read the rest of this Richmond Times-Dispatch article.

The sponsor of the last surviving piece of legislation to rein in the payday loan industry threatened Monday to pull his bill if opponents try to place harsher restrictions on the short-term, high-interest lenders.

The Virginia Daily Press had the report.

Sen. Richard L. Saslaw’s industry-backed bill is the only one remaining out of more than a dozen introduced this year to either reform the industry or repeal the 2002 law that allowed providers of payday advance loans to sidestep the state’s 36 percent annual interest rate limit.

Efforts in the House to reform the industry died last week when the bill’s sponsor struck his legislation after an amendment was added to cap the annual interest rate payday lenders could charge at 72 percent.

Saslaw said he would follow suit, killing all hopes of online payday loan reform this year.

“If any amendment gets put on it that I don’t like, I certainly will” strike the bill, said Saslaw, D-Fairfax.

Del. Jennifer L. McClellan, D-Richmond, who fought for the 72 percent interest rate cap on the House version of the bill, said legislators were hoping for a compromise before Tuesday, when a House committee is scheduled to hear the bill.

“I think it depends how close we are to a deal this afternoon,” she said. “If we can’t reach a deal today, I think probably the bill will be stricken.”

McClellan said she could live without the 72 percent interest rate cap as long as some sort of measures to protect repeat borrowers - like a cap on the number of quick cash loans an individual could take out in a year - were added.

The bill would create a statewide database to track payday loans and limit to three the number an individual can have out at one time. It also would require a 24-hour cooling off period before someone can take out a loan after paying one off and allow borrowers with three payday loans no faxing to have 60 days to pay them off.

The average payday loan customer in Virginia took out seven loans in 2005, but opponents say that number is deceiving because most customers borrow from one lender to pay off another.

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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.”

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