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PAY DAY LENDING: TEXAS, OKLAHOMA, ILLINOIS (Score: 1)
by jennifer5 on Thursday, February 07 @ 20:06:54 GMT
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Not even the free-market conservatives who control the House of Delegates are willing any longer to defend the predatory practices of the commonwealth’s payday lenders.

House Republican leaders have enlisted in a gathering moral and political consensus shocked by the industry’s excesses. On Monday Speaker Bill Howell and other senior GOP delegates joined with the Virginia Legislative Black Caucus to unveil a bipartisan reform proposal. That unlikely alliance spans the political spectrum and sends an unmistakable message that no fax pay day loan [www.solveonline.com] companies must clean up their house or face having it shut down. It is politically important because it recognizes the futility of relying solely on truth-in-lending kinds of warnings for consumers.

The best way to deal with payday lenders is to make them abide by the 36 percent interest rate ceiling that applies to all other lenders. That would stop them from trapping Virginians in a cycle of debt.

The new plan is neither as simple nor as foolproof. But it represents an earnest effort to end practices that have put thousands of Virginians in a financial quagmire.

The bill sponsored by Newport News Republican Del. Glenn Oder offers several important safeguards. It allows a payday customer to have only one loan of up to $500 outstanding at any time. It limits individuals to five loans a year. It imposes a mandatory 24-hour cooling off period between loans.

Oder compares his bill to a rope in a pool that warns swimmers when they are drifting into deep water. His goal is to help people avoid getting too deep into debt.

Even if his bill becomes law, payday lenders would still be permitted to charge interest and fees equivalent to an annual rate that could exceed 100 percent or even 200 percent in some cases. That may not seem like much in the way of consumer protection, but payday lenders are currently allowed to charge fees equal to a 391 percent interest rate.

While not perfect, Oder’s bill is an acknowledgment of the political reality at the state Capitol. Payday lenders stroked checks for more than $245,000 to political campaigns last year, and they have many powerful friends in the legislature. Chief among them is Senate Majority Leader Richard Saslaw, a Democrat who controls the committee that reviews financial bills.

Saslaw has set up a panel, headed by Sen. Ken Stolle of Virginia Beach, to look at options for reforming the payday industry. Stolle is an ally of payday lenders.

If the senators cannot find it in their hearts to support a 36 percent interest rate cap, the House now offers an option that better protects people from taking on more debt than they can manage.


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