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Is the Payday Message Being Heard? Lynchburg News & Advance Monday, December 3, 2007
Virginia localities from the Northern Neck to the Shenandoah Valley and the Southwest have a common bond that has thus far escaped the General Assembly. Their local governments have taken a position against payday loans with annual interest rates that approach 400 percent. It’s a welcome show of support against lenders who prey on those least able to afford the two-week cash advance loans that carry interest charges of $15 for every $100 borrowed. A growing number of city and town councils have approved resolutions urging the Assembly to pass legislation capping interest rates on all loans in Virginia at 36 percent annually. As The Associated Press reported a couple of weeks ago, the movement began in Staunton in September. From there it has spread to Waynesboro, Pulaski and Charlottesville, where its city council was to take up the measure this week. Some localities, including Arlington, Newport News and Norfolk, have included the issue in their legislative agenda, but have not passed resolutions. Legislators approached the issue of reforming the payday lending industry this year, but those efforts died when negotiations broke off between industry representatives, consumer advocates and Gov. Timothy M. Kaine in the session’s final hours. Now citizens all over the state are speaking on the issue through their elected councils. It shows that citizens “are encouraging our elected officials in Richmond to curb the abusive practices in this industry,” said Dave Norris, a Charlottesville councilman who runs a homeless ministry. Bruce Elder is a Staunton councilman who drafted that city’s resolution. Capping the interest rate, he said, “is the most reasonable thing that we can do, and 36 percent is a terrifically high interest rate; 400 percent is unconscionable.” Payday lenders have cried the blues every time the legislature talks about capping their interest rates. They say a 36 percent cap would put them out of business. A 36 percent annual interest rate would prohibit them from charging more than $1.38 for each $100, two-week loan. Why should they be allowed to make their usurious profits off the backs of those who are already living from one paycheck to the next? It has been shown that the payday loans create a vicious cycle in which borrowers go from one loan to the next simply to stay afloat. In the meantime, the nearly 400 percent interest rate is eating them up. The industry has also questioned what would happen to their customers if the state capped the rate. It should take a look at the neighboring states of Maryland, North Carolina and West Virginia, where rate caps of 36 percent have been imposed on payday lenders. Washington, D.C., recently passed a 24 percent rate cap. So what happened to the former payday loan customers? They are doing just fine, according to Elder. “In the 13 states where payday loans are illegal, people haven’t had to get up and leave. They haven’t had to pick up stakes because they couldn’t borrow 300 bucks,” he said. The grass roots support that is growing around Virginia for an interest rate cap of 36 percent on the payday loan industry should send a message to the legislature when it meets again in January. That message: make Virginia the 14th state that has capped interest rates on payday loans at a reasonable rate of 36 percent or less.
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Presbytery of the James |