Charade persists on high-interest lenders

State lawmakers are pretending to get tough on predatory lenders again this year, but as usual half-measures have faded into quarter-measures, and lobbyists have weeks left to further neuter the few consumer protections that survive.

The (marginally) good news: The state Senate passed a measure requiring car title lenders to count a portion of each borrower's monthly payment toward paying off the principal. That would limit a common trap today, in which a consumer takes out a loan for $1,500, pays $4,700 in interest over the next year - and still owes the original amount of the loan. The Senate bill would ensure that the debts would be fully paid in a year.

The results tilt downhill from there. Right now, title lenders charge 300 percent annual interest even though they hold the title to a borrower's car as well as a copy of the keys. The Senate bill makes a feeble effort to cap interest but still allows an offensive 200 to 264 percent rate.

"If you can't make a go on 200 to 240 percent interest there's something wrong with your business model," Senate Majority Leader Richard Saslaw, sponsor of the measure, told title lenders Monday.

This is what passes for a scolding at the state Capitol these days. Saslaw acknowledged that the interest rates in his bill were "suggested" by the title lenders themselves.

Consumer advocates had hoped Saslaw would at least use his bill to close a legal loophole allowing predatory lenders to peddle open-end lines of credit with unlimited interest rates. Saslaw's bill goes only halfway, prohibiting title lenders from offering the open-end loans but allowing many payday lenders to continue the practice without restrictions.

In the coming weeks, House Republicans will sniff over the Senate bill. If they decide it smells too much like progress, they will kill it.

Regardless of the outcome, legislators are already planning a study of open-end loans later this year, followed by a study of payday lending in the future. Last year's study of title lending accomplished nothing, and there's no indication that the new studies will generate different results.

But that's the point. With the threat of new restrictions hanging over their heads, predatory lenders doled out $280,000 in political contributions last year. As long as lenders keep stroking checks, legislators will study this issue into infinity.

There are few heroes in this sordid game of footsie between predatory lenders and legislators, but Sen. Mamie Locke deserves credit. The Hampton Democrat politely but firmly insisted that legislators vote on her proposals to cap interest rates for title and payday lenders at 36 percent. That's the only way to guarantee consumers won't be ripped off by these legalized loan sharks. Sen. Tommy Norment has complained that this debate comes up year after year. But he had a chance to put an end to this annual charade. He could have voted for Locke's bills. Sen. Yvonne Miller of Norfolk voted yes for true reform. Sen. Frank Wagner of Virginia Beach voted no. Norment's vote? "Not today." Ultimately, the bill failed.

Locke should make sure Norment has another opportunity to vote the right way next year. And the next. And the next.