Compromise bill limits payday loans to five in 180 days

RICHMOND

The General Assembly, after years of crumpled compromises, has brokered a deal to put limits on payday lending.

And everybody agrees the complicated treaty is not the one they wanted.

The agreement, approved by panels of the House of Delegates and the Senate on Monday, still needs to pass the full chambers before the session's scheduled end Saturday. Gov. Timothy M. Kaine has said he looks forward to seeing the package.

The compromise limits borrowers to one loan at a time, five loans in 180 days and sets a 36 percent cap on interest charges. The bill also prescribes waiting periods, extended payment plans and creates a database to track loans and borrowers. The database would start next year.

Industry lobbyists said the compromise could eliminate options for borrowers. Critics said legislators didn't do enough to curtail the trade.

"Nobody is happy with everything that is in the bill," said Sen. Kenneth Stolle, R-Virginia Beach. "Everybody recognizes it is a significant step forward."

Del. Glenn Oder, R-Newport News, had a bill, HB12, to limit borrowers to five loans a year. But Senate Majority Leader Richard Saslaw, D-Fairfax, said the measure would never pass the Senate.

Under current law, there is no limit on how many loans a person can borrow. "This clearly knocks it down," Oder said.

Oder's bill sailed through a Senate Commerce and Labor Committee with a unanimous voice vote. A companion measure, SB588 from Sen. Phillip Puckett, D-Russell, had a harder time at a House Commerce and Labor Committee hearing. It passed, 13-9.

Del. Kenneth Melvin, D-Portsmouth, prefers longer lockout periods for someone who is taking out five loans in six months.

"This particular bill does not end the cycle of poverty," Melvin said.

In the compromise, a person taking out their fifth loan in 180 days has two choices.

They can pay off the loan and be barred from getting another for 45 days. Or they can sign up for a 60-day extended payment plan, followed by a 60-day lockout.

Del. Terry Kilgore, R-Lee County, said he understands advocates fear borrowers can still take out more than 10 loans a year, but added "it's hard to legislate between people and their money."

Other legislators complained the compromise increases the costs of payday loans.

Currently, lenders can charge $15 for every $100 loaned. No loan can be for more than $500. The new rules let lenders charge 20 percent of the loan amount, plus a $5 filing fee, plus interest.

"It's $105 for me to borrow $500, plus 36 percent," said Del. Harvey Morgan, R-Gloucester. "You don't see that as exorbitant? As usurious?"

Jamie Fulmer of Advance America, one of the state's largest lenders, said limiting loans could hurt his industry.

"That changes the dynamics of the very thing consumers like about payday loans," he said. "We just don't know how consumers will react."

Mark Hubbard, a lobbyist for the Center for Responsible Lending, said the deal is a step forward, but legislators could have done more.

"We missed an opportunity," Hubbard said.

Ben Greenberg, legislative director of the Virginia Organizing Project in Charlottesville, said some borrowers can still take out 15 loans a year.

"That is a large number of loans and certainly far in excess of what we thought would be appropriate and necessary to break the cycle of debt," he said.

Oder agreed, but said a compromise was the only option.

"While I am not completely satisfied with this bill, these measures represent the strongest reforms in the nation, short of repeal," Oder said.

Richard Quinn, (757) 222-5119, richard.quinn@pilotonline.com