Conservative Viewpoints

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



  • ReoAd

    mainstreet_ad_pdf.jpg

    C&LPhoto

Virginia putting the squeeze on predator lenders

Posted by Stephen on June 9, 2007

While the predator practices of payday lending grab the bulk of the headlines, their evil cousin continues to plot a course to devastate the financial landscape from sea to shining sea. Virginia Attorney General Bob McDonnell may have something to say about their plans in the Commonwealth.

Title Lenders are every bit the predator payday lenders have been. In fact, title lenders in Virginia levy an APR of over 500% and engage in practices just as unscrupulous as their cousins. In a recent Newsweek article entitled Dragged Down by Debt, Jane Bryant Quinn explains that car-title loans can get consumers into even more trouble.

Randall McCathren, president of the auto-finance consultant BLC Associates explains that “You can borrow anywhere from $250 to $2,500 against a paid-up vehicle, giving the lender your title and a duplicate car key as security. There’s a fee upfront and a triple-digit interest rate, the loan falls due in 30 days, and each time you renew you’re charged the fee, plus interest, all over again. If you can’t pay, you lose the car or truck you may need to get to work.”

One of the more despicable acts conducted by these businesses and reported in Newsweek took place in Broadway, Virginia. In this sleepy little town there are few that suspect an enemy of decent society would be allowed to set up shop in their back yard. However, Thomas Elliott, 36, and Joshua Reel, 26, no better and now they find themselves fighting to save a car.

According to Newsweek, last September the two men took a $250 loan from Loan Max in Harrisonburg, Va., against a 1988 Pontiac. “Both handicapped, they live on Social Security disability and can’t read well enough to understand the loan documents, says their Legal Aid lawyer, Grant Penrod. They thought that a payment of at least $61 a month would retire the loan in four or five months. No dice. They paid $278, then went for help when they saw that the amount they still owed had actually risen to $309.86,” writes Quinn.

Thankfully, the winds of change and accountability may be blowing into the Commonwealth. Attorney General Bob McDonnell’s office seems to have taken the bull by the horns and forced Loan Max to agree to a significant financial settlement with many customers that they exploited and with the Commonwealth.

On November 16, 2006 the Attorney General’s office issued a “Notice of Violation” letter to Loan Max citing a violation of the Consumer Finance Act. The company has 36 locations in Virginia. According to the Commonwealth, Loan Max charged and received interest in excess of 36% for loans up to $2,500 and by imposing immediate cash advance fees while not recognizing a mandatory grace period before fees could be attached.

Specifically, Loan Max was charging a 25% “cash advance fee” at the time of the loan. The result was that a person taking a $1,000 loan owed $1,250 on the very next day. The resulting law suits brought by legal aid lawyers and private consumer lawyers Dale Pittman and Tom Domonoske led to a cease in the practice by Loan Max. The AG’s office took up action to investigate the practice and the impact it had on citizens in the region.

As a result of the Commonwealth’s action Attorney General Bob McDonnell announced a “Settlement Agreement with Loan Max and LoanSmart (Loan Max) for violations of Virginia’s Consumer Finance Act.”

Speaking about the settlement, Attorney General McDonnell said “I am pleased we were able to reach a fair and reasonable agreement with Loan Max that will provide refunds and other relief to thousands of affected Virginians. The Office of the Attorney General is charged with representing Virginia’s consumers, and this is a positive development for many Virginians.”

The Settlement Agreement with Loan Max included the following key terms:

Loan Max agrees to make refunds totaling $206,415 to 1,790 borrowers for cash advance fees paid on loans paid in full during the first two billing cycles. Loan Max will contact all Virginia consumers who are eligible for refund checks;  
 
Loan Max agrees not to collect deficiency amounts owed by almost 12,000 Virginia borrowers who obtained loans and later defaulted on those loans;

Loan Max agrees to pay $35,000 to reimburse the Commonwealth’s attorney’s fees; and

Loan Max agrees to pay $50,000 to be distributed by the Office of the Attorney General to nonprofit credit counseling agencies in Virginia. The following nonprofit agencies that provide such credit counseling and debt management services to Virginians each will receive $12,500: Alliance for Families & Children of Central Virginia, Child & Family Services of Eastern Virginia, Commonwealth Catholic Charities and Catholic Charities of Eastern Virginia.

In spite of the non action by Congress to aggressively address predator lending, and in the face of a failure to act by the legislature in Richmond, particularly the State Senate, the Attorney General’s reaction is a welcome sight to many, but the call for further action persists.

Elected officials in the Commonwealth will have an opportunity, once again, to act on behalf of citizens to protect them from exploitation by the actions of predators dressed up like lenders.

Consumers who have questions about the settlement may contact the Loan Max customer service center at 1-800-324-4061.

Stephen Winslow is a former manager of a Payday Lender who continues to advocate a 36% cap on all interest rates of payday and title loans. Winslow is the executive editor of Conservative Viewpoints.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: