Payday lending charges; establishing maximum annual interest rate. (SB24)

Introduced By

Sen. Roscoe Reynolds (D-Martinsville) with support from co-patron Del. Al Eisenberg (D-Arlington)

Progress

Introduced
Passed Committee
Passed House
Passed Senate
Signed by Governor
Became Law

Description

Payday lending charges. Establishes a maximum annual interest rate for payday loans of 36 percent. References in the Payday Loan Act to the fee that may be charged on such loans are revised to refer to the interest that may be charged. Read the Bill »

Outcome

Bill Has Failed

History

  • 12/12/2007 Prefiled and ordered printed; offered 01/09/08 087857316
  • 12/12/2007 Referred to Committee on Commerce and Labor
  • 01/23/2008 Impact statement from SCC (SB24)
  • 02/06/2008 Assigned C&L sub: Special on Payday Lending
  • 02/12/2008 Left in Commerce and Labor

Duplicate Bills

The following bills are identical to this one: HB12 and SB670.

Comments

Doug Smith writes:

36% should be the interest cap for payday lenders in Virginia. Delegate Oder's bill draws a line in the sand for all citizens prompting us to ask what is a fair interest rate. Families are struggling in this period of economic downturn with gas prices surging, mortgage default rates sky high, and the price of food increasing. The General Assembly of Virginia should cap interest rates at 36%, which is still 50% more than Washington D.C.

Jay Speer writes:

Below is an editorial from the Virginian Pilot

Now or never on payday lenders
The Virginian-Pilot
© December 6, 2007
Last updated: 6:12 PM

It will be difficult for lawmakers to disentangle Virginia from the web that predatory lenders have spun on our communities.

But that arduous task must be accomplished during this winter's General Assembly session. If legislators flinch, as they did in 2007, they will give payday lenders another year to become more entrenched in the halls of the Capitol and in neighborhoods across the state.

The number of payday offices in Virginia ballooned from 596 to 791 in the past three years. Twenty-two new payday offices sprouted up in South Hampton Roads just last year.

Dig deeper into the statistics collected by the State Bureau of Financial Institutions, and the human cost begins to emerge.

Payday companies loaned out $1.3 billion last year, up from $655 million in 2003, the year after they received permission to charge more than 36 percent interest. More than 433,500 people obtained a short-term, high-interest loan in 2006, with nearly 97,000, or nearly one in four, taking out 13 or more loans.

Payday lenders filed lawsuits against 12,500 borrowers last year, more than double the number reported in 2003.

Hampton Roads has long had one of the highest concentrations of payday lenders in the state, but Northern Virginia communities have reason to fear that they will soon be swamped with new offices peddling "easy money."

In September, the City Council of Washington, D.C., voted to cap payday loans at a 24 percent annual interest rate. Many of those companies are expected to flee across the state line into Virginia, where state laws allow interest rates of nearly 400 percent.

North Carolina banned predatory lending last year, while Maryland and West Virginia have never granted state approval for payday companies.

Surrounded by states that have made it clear payday lenders are not welcome, Virginia leaders must take swift action to protect their constituents or they will bear the blame when payday lenders overrun the state.

Jay Speer writes:

Support the 36% movement. Check out www.virginiafairloans.org and www.faithfulpledge.org

Judy Knobling writes:

I can't believe we are even considering a maximum interest rate of 36%. That is outrageous! Do you have any idea of how many people will default on these type loans, the costs and expenses added to the original loan (in addition to interest) when they are unable to pay, etc. How is this helping us avoid a recession? Not only should we bar payday loans, we should ban car title loans!

Adam Bell writes:

Yes, pay day lending should be banned but that would be nearly impossible to achieve. At least capping them at 36% is a fair compromise and a good start.

Ben T., tracking this bill in Photosynthesis, notes:

Level the playing field. All the other state lenders are limited to 36%. The payday shops can do it, too, or they shouldn't get to play at all.

Ben Thacker-Gwaltney writes:

Judy, tell your legislator how you feel!

Sara Ann Miller writes:

This is the moral stance our state needs to take to show that the legislature stands for all the citizens of our state, including citizens who are vunerable because they live paycheck to paycheck.
Actually 36% is too high but it is the banking standard and is a BIG improvement over the 390%+ that is the payday industry standard now.

VA A., tracking this bill in Photosynthesis, notes:

AARP Supports

Ryan Rinn writes:

Predatory business models deserve no special exemption from Virginia State Law. They should have to operate under the Usury Cap of 36% outlined in the Consumer Finance regulations for ALL other lending institutions.

robert legge writes:

If you forget to pay your state income tax, they charge you 100% interest. Makes 36% seem downright reasonable.

Pedro Garcia writes:

I look at this as a way to make sure pay day lenders do not get deeper into the pockets of the less fortunate. I guess they have their place in society, but where, I do not know. Maybe at the bottom of the heap.
Anyway, I think pay day lending is a big farce and to allow it to continue would be an indication that our lawmakers in Richmond are out of touch with the people they were elected to serve. I guess that is too much to ask of our representatives in Richmond that they remember who put them there and that they could be out of a job come the next elections.

WV Jenner writes:

It will be a sad commentary for the House & Senate if they fail to bring this situation under control in Virginia. If the Feds said our military WILL NOT be subject to these terrible rates, then why would the General Assembly say "Oh, its O.K., Virginians need someplace to get these short-term funds. "WRONG"; who is to believe our Delegates and Senators are so out-of-touch that they actually believe that.!! Re-educate those least among us, & send them to our Credit Unions if you think banks don't want to lend short-term funds. If you join a C.U. you can borrow at 8.75%.. Visit 1st Advantage C.U. for more info...

Sara Ann Miller writes:

Payday lender(390%apr) - borrow $100 pay in 2 weeks $115
1 credit union(18% apr)- borrow $100 pay in 2 weeks $100.74
Payday at (36%apr) borrow $100 pay in 2 weeks $101.48
Tell me what is fair! REasonable, collectable, fair

Reynold Brockett writes:

I have read the post in responses listed here and I respect your guy's views. I am an employee of this industry in which this bill affects. I can't believe most of you are jumping on the band wagon, last time I checked if you bank with a financial institution and you have a savings account your bank is charging customers whom can qualify a sometimes outlandish interests as well as your credit card company. I see that Oder isn't going after the credit card companies, banks whom make their money primarily of late on overdraft fees and mortgage companies.
Most of you don't even realize that Western Union fees to send money within the united states equal the price of borrowing from a payday lender. Also what Oder and many other's whom endorse this bill fail to realize they have money and can vote themselves a raise at anytime without our approval while those of us whom are employed by someone don't have that luxury.
Those of you whom side with the lawmakers take into consideration that when you become a senior citizen and have to rely on getting a monthly stipend from the government and no other source of income. You have to pay for your roof over your head, monthly bills, and still have to get your medication. When you look at the decision to side with Oder remember when your in a bind and you need an extra 100.00 to make it till next week can you call Oder and ask him for it or will he tell you the old cliche let me have one of my staffers see what we can do for you. While you sit there and wait for an answer that is going to be no. You remember this bill.

Hope O writes:

I agree with Mr Brockett. I also work in the industry. First and formost let me assure you that my customers are not poor or uneducated. That seems to be the biggest misconception. Payday loans charge a fee. Not an intrest rate it is a flat fee. $15.00 per hundred dollars. That is all. For the same price that the bank will charge you for an NSF fee ($30)you can get a payday loan for 200.00. So would the powers that be rather have your account overdrawn or your bills paid and your bank account in good standing. The people who use payday loans are responsible, hard working people who sometime need just a little help. If you have never been in that situation how can you tell me what options I should have the right to use. And let me explain, I was a customer before I began working for a payday loan company. I have been employed at my company for 4 1/2 years and it has been the best job I have every had. You think that if you limit or end payday loans in Va that it will stop its use. But what will happen is that those customer in need will use unregulated internet lenders from god knows where and with much higher fees and they really do have unscruplous collection practices. If you want to regulate something, why dont you limit the number of credit cards that people have and the late FEES and over the limit FEES that they charge and see if as many customer need us. A lot of well of people live credit card to credit card and the rest of us POOR soul are stuck just living paying check to paycheck. LET CONSUMERS MAKE THE CHOICES THAT ARE BEST FOR THEM.

Waldo Jaquith writes:

This business of claiming that a percentage rate of 15% is not, in fact, a percentage rate but a fee all sounds so familiar. I just realized why. It's the same like used by politicians who claim that their proposal for a new tax is not, in fact, a tax -- it's a fee, and we're supposed to figure that's somehow OK.

Mike V. writes:

It doesn't seem nutty to me that someone might need a small loan with overdraft fees in the $30-35 range. For someone to say that this service should be abolished is high-handed and smacks of elitism. That being said, I feel this bill limits consumer choices and seems designed to benefit the larger payday loan companies with the financial might to withstand the one check limit. Also, the part of the bill that limit opening payday loan services within 1 1/2 miles of one another seems to set up territories and in my opinion carries anti-trust implications. I feel that this is a bad bill because it limits the choices of consumers who may need this service.

S. Shah writes:

While I fully agree with Mr.Brockett and Mr.Hope, I would like to add that when someone requires funds immediately, payday loan is the only source to instantly give them the money - no one comes to their rescue at that critical time. If you close this option in Virginia they are going to end up paying hefty fees thru unregulated internet loans. Major revenue of Banks is thru NSF fees. Many borrowers take payday loans and deposit the funds in the bank to avoid bounced checks and high NSF fees. Is the law being passed to protect the Borrowers OR increase the Bank revenues? Putting a cap of 36% is as good as closing down this business completely. Short-term payday loans do not have long term maturity periods (unlike Bank loans), so what sense does APR(Annual Percentage Rate) make and why APR becomes the highlighted issue? Payday loan borrowers are employed people and they use these funds responsibly. If the number of loans are limited to 5 per year as suggested in the bill, I am sure that majority of them will not come to re-pay the 5th loan and the Courts will reap profits by charging $48 for warrants and $84 for garnishments ($132) on a single loan even if the loan is only for $100-Borrower eventually ends up paying all dues. My suggestion to improve the situation and reduce the burden on a borrower is to make it mandatory to reduce loan dollar amount after every few loans and ensure that the loan is paid off eventually. Did anyone really ask the borrowers what they want??? If you do, I am sure this bill will never be presented again in Virginia.

jay speer writes:

Thank you payday lenders for providing the last two comments. Where would we be without their self-serving nonsense blogging? Anyone who thinks payday lending is a "service" or "rescues" people is either a payday lender or not paying attention.

ca writes:

Now that we have some control over the predatory practices of the Pay day loan industry. We should hit the banks The NFS fees are just as bad. Currently if you are off by a penny, you could very well be charged in the hundreds of dollars in nsf fees. Lets get together and push this reform. These banks are making a killing off of hardwroking people everyday, and the sad part is that they have been doing it for years. Hopefully this legilation is the tip of the iceberg in reforming the world of personal finance in this great commonwealth.