Payday lending compromise bill is announced

RICHMOND

Legislators signaled Monday that efforts to overhaul payday lending laws in Virginia are picking up steam.

Members of the House of Delegates announced a compromise payday lending bill on the same day that a state senator told industry lobbyists during a crowded meeting that the lenders can expect change - whether they want it or not.

The compromise bill, endorsed by Republican House leaders and several Democrats, would cap interest rates on payday loans at 36 percent annually and limit the number of annual loans that lenders could make to individuals.

Moments after the compromise - a substitute for HB12 - was announced at a news conference, a payday lending official said the industry was stunned, and noted that lenders had not been included in discussions.

The bill could deprive customers of a choice and "possibly force them to more expensive products," said Jamie Fulmer, spokesman for Advance America, a Spartanburg, S.C.-based payday lending company.

Del. Glenn Oder, R-Newport News, the sponsor of HB12, said the compromise would allow lenders to offer short-term unsecured loans at a profit, but "what they can't do is they can't roll the loan over. They can't continue to trap people into a cycle of debt."

Lawmakers first allowed payday lending in Virginia in 2002. There are now nearly 800 stores in Virginia, including 142 Advance America locations, Fulmer said. Those lenders made more than 3 million loans last year, said Reggie Jones, a lawyer and lobbyist for the industry.

There has been momentum in recent years to further regulate payday lenders in Virginia, but no such legislation has become law.

Del. Terry Kilgore, R-Scott, chairman of the House Commerce and Labor Committee and architect of Monday's compromise, said that after three years, it's time to do something.

Gov. Timothy M. Kaine, a Democrat, said Monday that the new proposal represents real progress and he looks forward to seeing an industry overhaul bill make it to his desk this year, according to Gordon Hickey, his spokesman.

The proposed 36 percent cap on interest is the same limit that Congress has imposed on lenders who give loans to military members. The industry has resisted interest caps that low and said that could put them out of business.

The bill also would require lenders to enter their transactions into a database and would prevent additional loans to customers with an outstanding loan. Borrowers would be limited to five loans a year. The bill also would allow lenders to charge as much as 10 percent of a loan's value as a fee and charge a $5 verification fee.

The database would ensure no borrowers have more than one outstanding loan and would require a 24-hour "cooling off period" between loans.

That bill is scheduled to be heard today by Kilgore's committee.

Not long after the House compromise bill was announced, the leader of the Senate Commerce and Labor Committee made clear that the payday lending law had to be changed.

"We need to get this done because I do not want this to be a yearly event," committee Chairman Richard Saslaw, D-Fairfax, told the audience in a packed hearing room.

Sen. Tommy Norment, R-James City, said "I think Virginians are crying out for some reform," adding that if there is not substantial reform, he "could be convinced that the best thing to do would be to abolish the industry."

After 90 minutes of testimony on the issue, Saslaw appointed a subcommittee to try to find a compromise. It will be led by Sen. Kenneth Stolle, R-Virginia Beach, and will include Norment; Sen. Donald McEachin, D-Henrico; Sen. Linda "Toddy" Puller, D-Fairfax; Sen. John Watkins, R-Powhatan; and Sen. Phillip Puckett, D-Russell.

Saslaw said the subcommittee would meet this week and aims to present a bill at the committee's next meeting Monday.

Kate Wiltrout, (757) 446-2629, kate.wiltrout@pilotonline.com