Consumer Finance Act; open-end loan plans secured by motor vehicle titles. (SB1490)
Introduced By
Sen. Mark Herring (D-Leesburg) with support from co-patrons Sen. Mamie Locke (D-Hampton), and Sen. Roscoe Reynolds (D-Martinsville)
Progress
✓ |
Introduced |
✗ |
Passed Committee |
☐ |
Passed House |
☐ |
Passed Senate |
☐ |
Signed by Governor |
☐ |
Became Law |
Description
Open-end credit plans; loans secured by motor vehicle title. Limits the existing provision that currently allows any seller or lender to extend credit under an open-end or similar plan. The measure allows only sellers of personal, family, or household goods making open-end extensions of credit to purchasers when financing the price of such goods to charge interest and fees at any rate to which the seller and borrower agree, provided they give a 25-day interest-free grace period. The measure also provides that any loan to an individual for personal, family, or household purposes that is secured by a nonpurchase-money security interest in a motor vehicle shall be subject to the provisions of the Consumer Finance Act. Licensees under the Consumer Finance Act are prohibited from charging interest of more than 36 percent annually on such loan balances and are required to provide a 25-day interest-free grace period. Read the Bill »
Outcome
History
| Date | Action |
|---|---|
| 01/22/2009 | Presented and ordered printed 090143240 |
| 01/22/2009 | Referred to Committee on Commerce and Labor |
| 01/23/2009 | Assigned C&L sub: Special on Consumer Lending |
| 02/04/2009 | Impact statement from SCC (SB1490) |
| 02/10/2009 | Left in Commerce and Labor |
Comments
Support
It is time for our elected legislators to do their job and regulate the predatory lending practices of Car-Title Lenders and Pay Day Lenders. The interest rates charged are usurious and they result in the loss of jobs and homes for some hard-working folks who get trapped in a cycle of debt. In today's economy, many citizens are finding themselves in need of a loan and it is just plain wrong to take advantage of them. Senator Herring's bill, SB 1490 is a better bill than Senator Saslaws's bill because it would cap the APR at 36%. This is a fair interest rate. Anything above this is just plain usury! Let's come together to help the working poor!
I agree that it is well past time to regulate the interest rate the payday lenders charge. What worries me is that some of the legislators have the idea that by regulating the interest rate, the lenders will go out of business. Forgive me if I am not sympathetic towards a multi-billion dollar business that takes advantage of a person's misfortune. What about the livelihood of the people who are subjected to such usury? I know some people will say people have a choice to use or not use those services, but isn't our government supposed to protect it's citizens? 36% does not seem unreasonable.
Anita it's not a question of driving evil greedy rich lenders out of business. If you impose an atificial cap on the interest rates they can offer as part of terms, the reality is that the lenders will simply no longer offer the loans to the riskier borrowers (i.e. the people who need them the most.) That's how the lending market works. The potential sky-high interest rates that arise from breaking the intended terms of short term loans are part of the market defined price for loans that incorporate a calculated level of 1) underlying risk of default and 2) expected rate of return. It is literally a mathematical function that defines this, not just a matter of how greedy and selfish the lenders are feeling on any given day. If you put an artificial cap on what they can hope to try and get back that is LESS than their market-defined anticipation of return they will NOT GIVE OUT THE LOAN. Therefore the people who are hurting the most and have no other option to get quick cash will no longer have a choice or access to get their badly needed loan. They're screwed, all because some self-righteous people wanted to punish their politically-driven perception of those gosh-darned filthy evil lending businesses. This is one citizen who is talking to legislators and hoping to convince them to stop the madness and protect the people who rely on these loans and use them responsibly from having their access taken away.
David,
It is not self-righteousness, it is knowing how quickly a small problem can snowball into an avalanche. All it takes is one blown transmission or a trip to the emergency room. I understand that there is a risk for lenders, and somewhat agree that they should be compensated for this risk. But 300-360% seems a little unreasonable to me. Because they lend to the riskier customers, they should be allowed to charge an exhorbitant interest rate? I maintain that a marketplace which capitalizes on misfortune does not seem like it helps the people who utilize it, it punishes them.