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



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Editorial: Payday lenders get a reprieve

Posted by Stephen on February 18, 2008

Apparently the Senate isn’t serious about confronting predatory lenders.

The prospects of reforming the payday loan industry dimmed last week in the General Assembly. In all likelihood, lenders will prey on desperate Virginians for at least another year because senators refused to impose sensible restrictions.

Both the House and the Senate passed competing bills in the final days before crossover, the midpoint of the assembly session when each chamber finishes work on its own bills and starts considering the ones that passed the other chamber.

The House bill would cap annual interest rates on the loans at 36 percent. Interest on loans today can reach 390 percent. To offset some lost revenue, the House bill would allow lenders to charge additional fees. More important, it would cap the number of loans someone could take out each year at five and use a statewide database to ensure no one has more than one loan out at a time.

The changes were timid, to be sure, but at least they moved in the right direction. Lawmakers were not likely to protect their constituents from this predatory industry by outlawing it from the commonwealth, though that remains the best solution.

Then came the Senate bill. It had many of the provisions of the House bill, but in watered-down form. Fees would be larger and there would be no cap on the number of loans allowed in a year, for example.

Sadly, this situation echoes last year. Both chambers passed bills then, but they could not reconcile the differences and nothing happened.

Nothing is about all this year’s Senate bill is worth. If approved, Virginians in financial distress or unable to understand loan contracts will continue to find themselves caught in a spiral of unpaid loans and mounting debt. That’s no different from what happens now.

Many senators reluctantly supported their chamber’s bill. They now must work hard to push the House bill. It is the only hope for simple reforms that would not end injurious usury but might ease it a bit.

James W. (Jay) Speer
Virginia Poverty Law Center

Opinions expressed by editorial writers do not necessarily reflect those of management of Conservative Viewpoints.

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