Editorial: “Predatory lending made easy”
Posted by Stephen on July 14, 2009
By Dan Casey
Dan Casey is The Roanoke Times’ metro columnist.
Sooner or later I will leave this job at The Roanoke Times.
And lately, I’ve been thinking about the future after a long and fun newspaper career. I will go into business for myself. It will be a consumer lending (ahem) store. I’ll call it “Casey’s Rip-off Loans.” The motto will be “The Loan Shark You Will Love.” And our advertising slogan will be, “We cheat you honestly, unlike those other chiselers.”
Of course, none of this would be possible if it wasn’t for the Virginia General Assembly and former Gov. (and now U.S. senator) Mark Warner, so let’s thank them right now.
Once upon a time, Virginia was incredibly stingy about the interest a small lender in Virginia could charge a mark (sorry, I meant ”customer” ). It was something like 36 percent a year.
Then in 2002, the dopes (sorry, I meant ”brilliant lawmakers”) in the General Assembly fell hook, line and sinker for a con game rigged by loan sharks (sorry, I meant ”the fringes of the consumer lending industry”).
To make a long story short, they raised the cap on small, short-term “payday” loans to up to 782 percent per year.
In other words, they legalized loan sharking in Virginia.
It took lawmakers six years to do anything substantial about this.
In the meantime, sharp operators opened up in storefronts and plunked down office trailers all over the place, just like they had done in other states.
Their numbers swelled from about 200 outlets in Virginia, mostly around military bases, to more than 800, according to Jay Speer, director of the Virginia Poverty Law Center. Most of the new ones were located in poorer urban areas.
They ran ads on TV and the radio for easy-to-get and convenient “payday” loans. Bad-credit borrowers were welcome.
These cost only $15 per $100 borrowed — per week, if you got paid weekly, or per every two weeks, if you got paid with that frequency, or per month, if you were making payments from your Social Security checks.
While mafia loan sharks blushed at such profits, these legal outfits raked in the cash and passed some of that around in the form of campaign contributions.
But over the years, the horror stories of poor people trapped in debt cycles became so widespread that a majority of our brilliant lawmakers felt too embarrassed not to do something. So in 2008, and again this year, the General Assembly enacted some payday lending reforms that drove many of these outfits out of business.
But there is always a catch, you know? And that is where Casey’s Rip-off Loans fits in.
You see, car title loans are still legal in Virginia. And so are open-ended consumer loans. And get this: There is no interest rate cap on either. Even better, there is virtually no state regulation.
Not only that, but there is this nifty electronic process called “Automatic Clearing House” used by these goons (sorry, I meant ”loan store operators”) . It is advance permission to electronically tap borrowers’ bank accounts, just as a debit card works.
So Casey’s Rip-off Loans won’t even have the expense of muscle (sorry, I meant ”collectors’ ‘) to assure repayment.
We will join the proud Predatory Lending Association (you can find them online). They will help squelch other reforms now under discussion.
As you can see, our future is bright. And yes, I am accepting investors.
Ain’t the free market a grand thing?