New Va. crackdown on payday lenders takes shape
Payday lenders could be locked out of Virginia for 10 years if they surrender their licenses in order to peddle bigger loans with sky's-the-limit interest rates.
The House and Senate are falling in line behind the latest clampdown on high-cost, instant loans, with both sides moving toward floor votes over the next several days.
The Senate Commerce and Labor Committee, following the lead of its House counterpart, today backed legislation blocking an end-run by payday lenders on restrictions approved last year, but took effect less than two months ago.
Nearly three-quarters of more than 800 money stores in Virginia have been authorized by the State Corporation Commission to offer open-ended loans that exceed the $500 maximum for payday loans and carry virtually unlimited fees.
The latest move by the General Assembly against lenders, who have spent millions on lobbying, advertising and campaign contributions, is designed to confine most of them to payday loans.
The legislation represents the next step in a continuing effort to crack down on payday lenders, who have flooded into the state since it was opened to the industry in 2002 by then-Gov. Mark R. Warner, a Democrat, and a legislature dominated by Republicans.
"It's isn't perfect," said the bill's House sponsor, Del. G. Glenn Oder, R-Newport News. "Every year, we get a little bit more."
A lender who drops his license to focus on open-ended loans would not be eligible for a payday permit from the SCC for 10 years, under a compromise fashioned by Oder and Senate Majority Leader Richard L. Saslaw, D-Fairfax, in league with industry lobbyists.
However, the measure is "cleverly crafted," said Oder, to further control payday lenders while allowing car-title lenders to continue to operate here.
Their legal authority -- to offer loans under which borrowers risk losing their motor vehicles if they fail to repay on time -- is rooted in the same state law that payday lenders used to veer into open-ended loans.
Car-title lenders are emerging as the next target of consumer advocates, faith organizations and some lawmakers in the continuing battle of loans and other financing practices that are perceived as exploiting the poor and uneducated.
Over the next year, the legislature will be studying car-title lending and considering limits on that industry, which also has been a generous donor to House and Senate incumbents and candidates.
Saslaw, who also heads the Senate Commerce and Labor Committee, told lobbyists for car-title lenders today, "We will rein you in next year. Count on it; count on it."
Charles Duvall, among the veteran lobbyist who represent car-title lenders, declined comment on Saslaw's warning.
Source : http://www.timesdispatch.com/