- The Washington Times - Friday, February 16, 2007

RICHMOND — The House of Delegates passed a package of payday lending reforms yesterday, but opponents argued it still doesn’t do enough to keep borrowers from falling into a cycle of debt.

The Senate must agree to changes made in the House to further protect borrowers before the bill could be sent to Gov. Timothy M. Kaine, who has expressed a desire to limit the annual interest rate lenders could charge. Industry supporters have said caps would put the state’s nearly 800 payday lending stores out of business and leave cash-strapped Virginians with nowhere to turn for short-term, small-scale loans.

The bill, which passed 72-27, would create a statewide database to keep track of payday loans and limit borrowers to three at one time. Individuals would have to wait 24 hours before taking out a loan after paying off another, and overextended borrowers could enter into 60-day extended payment plans, during which time they could not take out another loan.

“Is it an industry that’s perfect? Are there people who misuse it? I’m not going to stand up here and tell you that doesn’t happen,” Delegate R. Lee Ware told lawmakers. “There are people who are going to misuse whatever is available.”

Mr. Ware, Powhatan Republican, withdrew his reform bill on the House floor last week after delegates placed on it a 72 percent annual interest rate cap. That left Sen. Richard L. Saslaw’s industry-backed bill the only one still in play out of more than a dozen introduced that would have either reformed the industry or repealed the 2002 law that created it.

Some legislators said the restrictions are sufficient to keep people out of debt while leaving payday lending as an option to those who need extra cash. In 2005, 445,000 customers in Virginia took out more than 3.3 million payday loans, according to industry figures.

“I really think this is a case of a room full of people with credit cards in their pocket telling people who don’t have credit that they can’t go get it,” said Delegate John S. Reid, Henrico Republican.

Those in favor of repealing the industry have said those in a tight spot could go to their church, family or friends for money. Delegate Onzlee Ware, Roanoke Democrat, called that option “crazy.”

“Who in the world wants to go borrow advance money from their boss? Who in the world wants to go to the church all the time and ask for money?” he said. “The whole point of payday lending, in my opinion, is to preserve dignity.”

Payday loans allow a borrower to write a check for the principal plus a fee. The company holds the check until the customer’s next payday, when he or she either pays off the loan or the lender cashes the check. Opponents argue that the majority of borrowers take out loans from one lender to pay off another, digging themselves deeper into debt.

The House changed Mr. Saslaw’s bill earlier this week to require payday lenders to automatically offer the 60-day extended payment plan to borrowers who had two others within the past year and to require lenders to post in their stores places where customers could get cash for less.

Industry opponents hold out hope that Mr. Kaine, a Democrat, will place an interest rate cap on the bill if it gets to his desk.

Last year, 10 payday lending companies donated more than $138,000 to members of the House and Senate, according to data compiled by the nonprofit, nonpartisan Virginia Public Access Project and analyzed by the Associated Press.

That represented a portion of the more than $311,000 given to the parties, statewide candidates and political action committees.

Minimum wage

A proposal to raise Virginia’s minimum wage was revived and sent to the House floor on a 12-9 vote Thursday, only hours after being killed in subcommittee.

Sen. Charles J. Colgan Sr.’s bill would increase the minimum wage from $5.15 per hour to $6.50 per hour, effective July 1. The measure would expire if the federal minimum wage is raised to $6.50 or more.

The full House will vote on the bill next week.

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