- The Washington Times - Saturday, January 31, 2009

Don’t think you get one over on us.

Irked by what they perceive as the lenders’ end run around tough new restrictions passed last year, senators unanimously passed a bill to bar them from offering other types of loans.

The majority of the state’s nearly 800 payday lending stores received regulatory approval to offer open-end loans that can carry unlimited interest rates after the General Assembly passed strict regulations on payday lending, which included limiting the number of loans borrowers could get annually. The restrictions took effect this month.

The rules were the result of three years of bickering among legislators, some who felt the lenders preyed on the vulnerable by trapping them in a cycle of debt and others who believed they offered a valuable service to those who can’t get traditional credit.

But the lenders’ willingness to offer open-end loans, which are essentially unregulated, has lost them many of their former allies.

Senate Majority Leader Richard L. Saslaw, Springfield Democrat, was the industry’s biggest supporter. But it was his bill that passed out of the chamber unanimously.

“I don’t believe in sending messages,” Mr. Saslaw said of the overwhelming vote. “I corrected a problem, and we’re not finished yet.”

He said he would try to restrict them even further when the bill gets in the House of Delegates, but would not elaborate.

With open-end loans, lenders can charge any interest or fees they wish, as long as there is none in the first 25 days. Consumer advocates say the unregulated loans are more harmful for borrowers than payday loans, under which a person’s check is held for collateral and the loan is due at a future payday.

Advocates for the poor say Mr. Saslaw’s bill is a small step, but there’s nothing to prevent payday lenders from dropping their licenses and offering only open-end loans. Many offer open-end lines of credit, which have interest rates close to 400 percent.

“Why would anyone think the payday lenders are going to do anything but what is most profitable to them?” said Jay Speer, executive director of the Virginia Poverty Law Center.

Jamie Fulmer, spokesman for Advance America, Cash Advance Centers Inc., the nation’s largest payday lender, said his company would continue to offer payday loans and would work with legislators “to ensure that Virginians have access to the credit they need.”

“It was never the industry’s intent to circumvent last year’s payday loan reforms by offering this line of credit product,” Mr. Fulmer said. “We saw an unmet need for access to modest, unsecured loans.”

Mr. Speer and others support separate legislation that would limit to 36 percent the interest that any company making loans under the open-end credit law can charge. Those bills have yet to come before a committee for a vote.

Mr. Saslaw said his bill only deals with the one problem.

“Can I tighten it up? Yes,” he said. “Am I interested in running everybody out of town? No.”

The bill now goes to the Republican-controlled House, where its chances of passage are uncertain.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide