RICHMOND
The Senate's commerce and law committee did not reach a compromise between opponents and supports of payday lending today, even as the House voted in support of a bill that would cap interest rates for short-term loans at 36 percent.
"There will be a bill, one way or another," committee chairman Sen. Dick Saslaw (D-Fairfax), said at the start of the meeting. He said the committee would meet again Tuesday.
This morning, a subcommittee chaired by Sen. Ken Stolle (R-Virginia Beach), quizzed a lobbyist working on behalf of payday lenders and one retained by the Center for Responsible Lending, trying to find common ground.
Virginia's legislature loosened payday lending rules in 2002, and the industry has ballooned since then. There are now more than 800 storefronts in the state, many in Hampton Roads. The industry loaned $1.3 billion in 2006, according to the state corporation commission. More than 96,000 Virginians took out more than 13 loans that year. The average annual percentage rate that year topped 378 percent.
Opponents of the industry claim that the short-term, small-dollar loans -- below $500, with $15 in interest for every $100 borrowed -- trap borrowers in a cycle of debt.
"One loan doesn’t make a cycle. Maybe two loans does not. Three loans begins to make a cycle," Stolle said.
Republicans, who control the House, reached an agreement with House Democratic leaders last week that would drastically limit lenders. In addition to the annual cap of 36 percent interest, H.B. 12 would require a statewide database to determine who has an outstanding loan, and would allow customers to have only one loan at time. Borrowers would also be limited to five loans a year. None of those provisions currently exist. Annual interest can top 300 percent. The House ratified that bill 91-7 today.
Tuesday is the last day for each house to finalize legislation before crossover day, when the Senate and House take up the others' bills.
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trapped in a cycle
I have trouble feeling sorry for these people who get trapped in a cycle, if fact, there is no trouble, I just don't feel sorry for them at all. These people get a second loan to pay off the first loan, not only is that stupid, it is called kiting money, and banks don't like it when you do that. Why not just go down to the payday loan store and tell them you need an extension. In my experience, they will charge you another $15 fee and work out a payment plan with you. You can only do this once, but if you don't learn your lesson the first time, you need to go back to Kindergarten anyway and you shouldn't be responsible for anything. Why is the government getting involved? The government would use these short term loans to pay off our national deficit if the payday lenders would do a Billion Dollar loan at $15 per Million! Our government can't even mow the White House lawn for less than 100K, why are we trusting them with a measly $300 payday loan decision? These payday stores are providing good paying jobs and they are stimulating the economy. Putting a 36% interest cap on them will shut them down. I use these loans, I don't have a problem with the fees I pay, leave them alone!