The Virginian-Pilot
©
RICHMOND
A Virginia Supreme Court decision that the practices of a payday lending firm violated state law is being heralded as a victory by those who want greater controls on the industry.
The court on Thursday concluded that a law prohibiting lenders from refinancing, renewing or extending loans applied to situations when a borrower repaid a loan and was given another credit line immediately after.
This practice was commonplace in Virginia for years, according to Jay Speer, executive director of the Virginia Poverty Law Center.
Speer claims that payday lenders made millions of illegal loans between the 2002 law that allowed them to operate in the state and 2009, when revisions took effect.
The law set the maximum loan amount - $500 - and interest rates and other loan-related fees. Amendments approved in 2008 require a one-day waiting period between paying off a loan and receiving a new one.
State Corporation Commission records indicate that 31 payday lenders were operating 288 offices in Virginia at the end of last year.
Speer said payday lending has "largely been an illegal scam." He accused lenders of misleading borrowers and lying to lawmakers when quizzed about serial loan practices.
A cycle of revolving loans was at the center of the Supreme Court's opinion. The decision reversed a lower court ruling on a claim brought by Wilma L. Ruby of Shenandoah County.
From March 2005 through November 2007, Ruby took out 33 monthly loans ranging from $200 to $500 from Cash Advance Centers, which surrendered its state payday lending license in May 2009.
On a fixed monthly income of $624, Ruby couldn't afford to pay her loan in full and pay her bills, the court decision states. So she would pay off her loan and associated finance charges, activate another loan and receive a payment from the lender, then repeat the cycle again a month later.
At trial, a company official described that process as initiating a new loan.
But the Supreme Court found that "the proceeds from each new loan were being used to repay the previous loan."
That determination "should put legislators on notice that the predatory lenders cannot be expected to follow the law when reform measures are passed," said Dana Wiggins of the Virginia Partnership to Encourage Responsible Lending.
The partnership is an offshoot of the poverty law center, which helped Ruby's lawyer on the case.
In a statement, Del. Glenn Oder, a Newport News Republican who for years has been a leading critic of payday lenders, vented his anger "that these loan companies would show such little regard for the actions of the General Assembly."
"This activity demonstrates they have no respect for the regulations we passed, and I call on other members of the General Assembly to join me in the fight to stop these predatory lenders," he said.
Oder said he will work with activists to counter the influence that the payday lending industry has in Virginia elections.
Consumer credit and lending companies made nearly $350,000 in donations in 2009 when statewide and legislative candidates were on the ballot, according to the Virginia Public Access Project, a nonpartisan tracker of political cash.
Julian Walker, (804) 697-1564, julian.walker@pilotonline.com
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While activists and
While activists and politicians are running around like headless chickens over payday lenders, no one is doing anything about the fact that people in our state, like Wilma Ruby, are struggling to survive. They can claim they’re helping consumers all they want, but activist groups and our Assembly are doing absolutely nothing about poverty in our state when they waste their time on payday lending.
Hooray for the Court!!!!
This court had the cuorage to do what the corrupt republican legisture would not do. these loan services exploit the most vulnerable in our neighborhoods. And our so-called "representatives" do nothing as long as they receive funding from the industry.
Partison Politics
To say this is a Republican caused problem is malarkey. The polarization about what Republicans and Democrats do or don't do just creates an acceptable excuse to those die hard party affiliates as to why neither party does anything. If the Republicans created it or another problem, the Dems could have rescinded it and vice versa. Party politics and blame regardless of party is just garbage and we have to all come together without party politics to make change instead of excuses. Blame doesn't fix a problem and as citizens of this great country, should never be accept blame as an excuse for a failure. We're going to reelect these officials because they did nothing to restore our greatness, but it wasn't their fault, it was the other guy.
liberal excuse
2010 the Republicans got control of the legislature. prior to that the Democrats both hold the Gov. seat and control the house side. The Democrats are the corrupt bought and paid for by this Payday and Loan Industry. It is noted on the article that it is a republican ligislature that is fighting this Industry.So Gadfly get your facts right and quit drinking that Lib cool-aid
There is a solution.... Savings account
About six years ago I got a payday loan. It's a trap. They try and force you to get the maximum amount. However, when you pay the loan on payday you are short on cash and find you need another loan to get what you paid.
I realized what a crock this was and for two weeks almost starved than to give them more money. I started a regular savings account and now when I am short on cash I borrow from myself.
These companies are common and should be run out of the state.
Loan Sharking?
These places exist is people sometimes need short term loans. There is a difference in being predatory, i.e. undisclosed terms or charging interest beyond the limits legally and of common sense, and poor money management. Obviously the lender should have never loaned the money based on the monthly income. How can you expect someone to pay $500 when they only get 650 a month. The borrower is equally to blame. How were they living on 650 a month? How could anyone live on that? I doubt that was their sole income unless they were living with relatives and had no expenses. I have seen people poorly manage credit cards and our federal government wants to raise the debt to pay the interest on the current debt. I don't think the lender is to blame.
The Other Shoe
Undoubtedly, the end result of this campaign against payday lenders will be a new "loan entitlement program" where the taxpayers fund and subsidize (directly or indirectly) a governmental loan program to people who will never repay the loans they receive. After all, "Shouldn't everyone be entitled to reasonable credit at reasonable rates" even if they can't afford it?.... and, of course, the money will come (directly or indirectly) from the minority of citizens who pay income taxes. It's just another big government scam.
actually
a number of credit unions have done just that - made small, short term loans available to their members with a smidgen of paperwork. it's a lot cheaper than the places on the corner.
many commercial banks have "overdraft privileges". for a reasonable fee, the account can be overdrawn for a short period, no cost until it's used. not sure what the fee is though. i know it's available on my account if my balancing gets messed up, just good insurance, IMHO.
i guess the point is that there are options, if one just looks around a bit.
You might want
to double check that overdraft fee. Some banks are using it as a fine-print profit booster. I think with the new regs, (that the banks don't like) you now must opt into it, rather than opting out.
Trouble that leads to more trouble
It's obvious that the people that do business with these loan sharks have a need that maybe only the sharks can fulfill but that's not the issue. It's the blatant disregard of the regulations imposed by the state on these industries that protect the consumer and are supposed to create a fair lending practice that is the issue. These "Cash in a Box" businesses can function and earn a profit if they follow the law. Instead they create a practice that keeps many of it's customers in a revolving financial crisis that forces them right back into over extending themselves. The only thing different between payday loans and loan sharking is a piece of paper called a business license. We survived years without them.