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■ 09 January 2009 | 5:00 AM

Payday Act doesn't apply

Re 'Payday lenders find more victims,' editorial, Jan. 2:

It is important to recognize that open-end credit products, which the editorial noted have no cap on interest rates and allow borrowers to remain in debt indefinitely by making minimum payments, are permitted under 6.1-330.78 of the Code of Virginia and are not regulated by the Payday Loan Act.

The Virginia State Corporation Commission authorized certain payday lenders to engage in the open-end credit business under legislation enacted in 2002 and a regulation adopted in 2004. The commission imposed restrictions on the conduct of open-end credit business in payday lenders' offices. For example, the SCC has prohibited open-end loans from being used to repay payday loans. It is worth noting that the SCC has no authority to prohibit payday lenders from conducting open-end lending if a separate location is used.

The SCC has carried out the duties assigned to it by the Payday Loan Act with close adherence to Virginia law.

E.J. Face Jr.
Richmond
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