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Payday Loan Legislation goes to Gov. Kaine Tuesday, Mar 04, 2008 - 12:09 AM Updated: 01:18 AM By JEFF E. SCHAPIRO TIMES-DISPATCH STAFF WRITER The latest effort at compromise in the payday-lending fight allows Virginians to take out at least 10 loans a year and creates a complex system for paying them back. With House and Senate panels backing the measure yesterday, the General Assembly appears poised to give Gov. Timothy M. Kaine his way: sending him a bill he may seek to strengthen if he decides it does not sufficiently clamp down on lenders. "The governor will take his 30 days to review the bill and look at it with a focus on whether it protects vulnerable people -- or not," said Kaine communications director Delacey Skinner. The new proposal -- disparaged by lenders and their opponents -- would restrict borrowers to one loan at a time. But the bill allows 10 loans a year -- a level that troubles critics. It also would block borrowers from drawing another loan for 45 to 60 days if they'd had five within 180 days. The length of the so-called lockout -- the period of time a borrower would be ineligible for another loan -- would be determined, in part, by what the customer owed. The proposal caps interest rates at 36 percent but largely preserves pricey fees that lenders collect. The 36 percent figure is an important symbol for the industry's critics because it is the maximum allowed by law. Borrowers who promptly pay the five loans would have to wait only 45 days. But those who can't repay on time would be eligible for a 60-day payoff plan and then would be prohibited for additional 60 days from taking another loan. Further, the base cost of a loan would rise. Now $15 per $100 borrowed, it would increase to $20, pushing the price of the maximum $500 loan from $75 to $100. But because the loan must be repaid over a longer term -- in the case of the typical borrower, four weeks rather than the current two -- legislators say its cost would actually be lower. "The benefit of the new fee structure is that the borrower sees what a high-cost product this is and will, hopefully, choose a more financially sound option," said Mark B. Hubbard, a lobbyist for the Center for Responsible Lending. Payday lenders, who have spent millions of dollars on lobbying, advertising and campaign contributions to stop additional limits on loans, said the bill headed to the House and Senate floors is unfair to responsible borrowers and a threat to industry profits. "This places additional restrictions on any user of the product, not just those who use it as intended," said Jamie Fulmer of Advance America, the nation's largest publicly traded lender. He said the proposal -- endorsed by the House and Senate Commerce and Labor committees on their last day to act before the legislature' s scheduled adjournment Saturday-- would force stores to close. "It may not drive every provider of the product out of business, but it may have the impact of driving some of the providers out of business," Fulmer said. Since Virginia was opened to lenders in 2002, some 800 stores have sprung up across the state, dispensing nearly $1.5 billion in loans last year. State figures show that Virginians typically draw eight loans annually from a single lender, with customers perhaps taking out as many as 14 loans from multiple cash shops. Industry foes said the proposal fails to address a larger issue: the rapid growth of financial services to low-income people -- services that carry can high costs and could ensnare customers in groaning debts.
"There is a
right way and a wrong way," said Neil Walsh of the Virginia wing of AARP. "We
don't seem to be worried about what is right. We seem to be worried about what
will get passed."
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Presbytery of the James |