Virginia’s payday and securities lending laws are among the most lax in the country
People in Virginia who take out payday loans and title deeds face interest rates up to three times higher than borrowers in other states with more stringent consumer protections, a analysis by Pew Charitable Trusts published this week concluded.
“Virginia’s small loan laws have unusually weak consumer protections, compared to most other laws in the country,” wrote Pew, a non-partisan think tank. “As a result, Virginia borrowers often pay more than residents of other states for loans and suffer adverse consequences, such as repossession of a vehicle and fees and interest that exceed the amount they received on credit. “
Among Pew’s findings:
• 1 in 8 title loan borrowers in Virginia has a repossessed vehicle each year, one of the highest rates in the country.
• Lenders sell 79 percent of repossessed vehicles in the state because borrowers cannot afford to collect them.
• Many lenders operate unlicensed stores and online in Virginia, issuing lines of credit similar to credit cards, but with interest rates that are often 299% or more, plus fees.
• Virginia is one of 11 states that does not have a cap on interest rates for installment loans over $ 2,500.
• Virginia has no interest rate limit on lines of credit and is one of six states where payday lenders use such an unrestricted line of credit law.
• Virginia laws allow lenders to charge Virginians up to three times as much as customers in other states for the same type of loan.
• More than 90 percent of the state’s more than 650 payday and securities lending stores are owned by out-of-state companies.
Payday and title loan companies are the top donors to Virginia lawmakers, losing $ 1.8 million in contributions since 2016, according to the Virginia Public Access Project.
The reform proposals, for their part, have stalled. For example, legislation introduced earlier this year that would have capped annual interest rates for certain types of loans at 36% was rejected by Republicans in the Senate Trade and Labor Committee.
A lobbyist representing TitleMax argued that the rate cap would force lenders to stop lending, hurting consumers.
Jay Speer, executive director of the Virginia Poverty Law Center, which has advocated for more stringent restrictions for years, called the claim outrageous.
“They made these reforms in other states and the lenders stayed and gave loans,” he said. “They charge three times as much here than in other states just because they can get away with it.”
A group called Virginia Faith Leaders for Fair Lending is holding a rally on Friday outside a payday lender in Richmond’s East End to call attention to the issue. Speer said lawmakers should expect a big push for reform at next year’s General Assembly session.
“The candidates have to decide which side they are on,” he said. “Fair loans or those big out-of-state businesses that are draining money from consumers in Virginia.” “