The Virginian-Pilot
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Virginia's State Corporation Commission tightened its regulation of high-interest, short-term credit by barring payday lenders from making car-title loans to individuals who already have a title loan outstanding.
In addition, payday lenders that extend a title loan must file a lien on the borrower's vehicle with the Department of Motor Vehicles, the SCC said in an order issued Dec. 29. The new rules take effect Feb. 1.
Faced with changes last year that restricted the scope of their lending, some payday lenders in Virginia began promoting open-end loans and lines of credit as car-title loans.
Payday lending and car-title lending have been heavily criticized by consumer advocates, who say that cash-strapped individuals often end up being trapped by the cost of this credit. The annual percentage rates charged are often 300 percent or more.
When the SCC weighed last fall whether to impose the new restrictions, payday lenders argued that having to register liens on borrowers' vehicles would be cumbersome and would add to what borrowers had to pay. Deciding whether to file a lien on a vehicle should be up to the lender, the Community Financial Services Association, a trade group for payday lenders, said in an Oct. 29 letter to the SCC.
Advance America Cash Advance Centers Inc., a major provider of payday loans in Virginia, said it received a copy of the SCC's order on Monday and was still assessing the new rules, said Jamie Fulmer, a spokesman for the Spartanburg, S.C.-based company.
Payday lending companies are still able to make title loans if they do so from a separate location not offering payday loans, said Jay Speer, executive director of the Virginia Poverty Law Center in Richmond and an advocate of the tighter regulation.
The SCC's new rules come at a time when some payday lenders in Virginia have surrendered their licenses to concentrate on car-title and open-end lending.
The number of offices in the state declined by a third during the first half of last year, to 513, the SCC's Bureau of Financial Institutions reported in its September 2009 newsletter for payday lenders.
Tom Shean, (757) 446-2379, tom.shean@pilotonline.com
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enforcement?
I see nothing about enforcement - how will the state know that a car title loan has been issued but a lien not filed with the DMV? Who will be checking? Will the state hire more people to monitor these new rules? Will title lenders file reports with the state that will be cross checked against the DMV database? Does the capability for interagency collaboration even exist?
Rules without enforcement are just words on paper. Have we learned nothing?
It's done by audit
They would have to provide the lien documentation during the regular audits. It's up to the auditors to verify the documents if they believe they are forged. It's the same way they check to make sure companies are remitting sales taxes and such.
sorry, one more...
How will title lenders place liens against vehicles titled in other states?
Sorry, I'm just rambling because I'm positive that the people who developed these rules carefully and thoughtfully considered all of these issues and have sufficiently addressed them.
Money talks
Guess which finance group gets preferential treatment, credit card/mortgage or paycheck lenders? Obviously the former of the two has the clout to delay changes so that they can enact " Killer " rates and stuff before the law begins while the latter group is talking through a megaphone from halfway down Pennsylvania Ave. and they get hit immediately.
Neither group is less than predatory but legislatures have always looked out for wealth and contributors. The group least served is the public because the legislatures allow us to be " savaged " during a too lengthy grace period before the laws become effective. Congress stinks, both bodies and both parties.
That's shedding business
No, that would happen no matter the timing. The new credit card government regulation has eliminated the eligibility for many to have a credit card, so they will be cut one way another. Everyone should take it as a big hint that if you get a major rate increase to a keep a card that you need to close it before it's closed for you. It's much better to have an account you closed on your credit report rather than one that was force closed. I'm not sure where this fantasy comes from that the government just needs to pass a law and money materializes from nowhere.
Do advocates really help?
If "advocates" keep making it harder to get credit, then people will have no where to turn when they can't pay their bills or their paychecks don't fully cover their budgets. It's a real issue facing many families in this day and time.
I wonder if the Poverty Law Center will represent you in court when the bill collectors come knocking.
If these "advocates" are really concerned about the everyman, they could put up the money and start a loan program they deem fair.
Did they expand the DMV?
Did they expand the DMV staffing to handle all the new liens or are we just going to be waiting in even longer lines?