Conservative Viewpoints

"Government is not the solution…it is the problem" -Ronald Reagan

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Senator Saslaw continues fighting for PD Lending industry

Posted by Stephen on February 14, 2007

The Payday Lending industry has a friend in Senator Saslaw (D-Fairfax). The senator, claiming the predator practice of payday lending “fills a niche” survived the House Commerce and Labor Committee by a 15-7 vote after spirited debate over SB1014.

SB1014 is a bill the industry wrote to suggest reform by adding a tracking system, and limiting the total number of loans a person can have at one time, from different lenders, to be three.

The bill also implements a payment plan option after four loans provided the borrower took the loans four consecutive times within 24 hours of paying the previous loan. If you are out of town over the weekend, for example, or have responsibilities that do not let you take the loan the next day you cannot apply for the payment plan. You have to start over and take four loans consecutively within the same 24 hour period.

Confused? You should be, and that’s just the way the industry wants it. The industry does not have to offer the borrower the payment option or advertise that it even exists, the borrower must make the request. The more confusing the process the less likely a borrower will ask, or know to ask, for the plan. Less then one percent of borrowers have been able to use similar plans tried in Oklahoma, Washington, and Florida.

Reggie Jones, and industry lobbyist, stated “these are things we are willing to give to try and reach some agreement that this is true reform.” Clearly the industry is still calling the shots within the halls of legislation in Virginia.

The reform bill does nothing to address the due date or the excessive APR of more then 390%.

Saslaw told the committee he could not accept an interest rate cap on his bill, such as the 72% cap attached to a similar industry backed bill that Del. R. Lee Ware Jr. (R-Powhatan) brought to the floor that Del. Jennifer McClellan (D-Richmond) successfully amended to add the cap.

Saslaw stated he supported the payday lending industry because statistics showed that demand for the loans existed. Previously Saslaw has pointed to the fact that more then 400,000 people received a payday loan in Virginia in 2006.

While it is hard to disagree with the fact that people do desire the ability to take out small loans that banks do not generally entertain, it would be ludicrous to suggest that allowing predator practices to be involved in Virginia business just because there is a need is good for the citizens of the Commonwealth.

To be sure, the predator industries of payday lending, and title lending, have found a market for their product, and legislators that support their practices. However, it would be negligent to suggest that these businesses act in the best interest of their customers.

Saslaw’s remarks suggest he believes that the people of Virginia are expressing a need through their decision to utilize these businesses. Unfortunately, what the Senator fails to acknowledge is that the predator practices of payday lending in no way provide a service for people, but instead clearly exploit the financial crisis of the working poor, senior citizens, and those struggling check to check.

Saslaw show’s little concern for those caught in the debt trap that the industry practices create. “We cannot protect everybody from doing stupid things,” he said.

This issue, and perhaps the bill, may still face changes before the final vote in the full House. “I’m not sure this bill goes far enough to solve the repeat borrower problem,” said McClellan. “But I recognize this is a process, and what comes out of this committee today may not be what we end up with.”

It also may not be what the citizens see. Governor Tim Kaine publicly stated his support for an interest rate cap, and he has the ability to amend the bill if it reaches his desk.

Critics of the industry written bill supported by Saslaw have said this is a case where nothing may be better then something.

“It’s clear that the provisions are not going to stop the debt trap. It lets the delegate leave for a year and say, ‘We’ve taken care of this,” said Helen O’Beirne, with the Virginia Partnership to Encourage Responsible Lending who is working with business groups and church groups to address the relentless practices of payday lending.

She added, “If it’s ineffective, that’s worse then nothing.”

Stephen Winslow is the executive editor of Conservative Viewpoints.


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