Friday, January 23, 2009

Hey Richmond: I told you so

Hate to say "I told ya so," but I and many others told the 2008 session of the General Assembly that their toothless reforms of the payday loan predators wouldn't do any good. Now, Senator Phillip Puckett (D-Russell Co.), one of the key supporters of that compromise legislation, says:
"They [payday lenders] are circumventing what we tried to do. That sends the wrong message, not a very good-faith effort on their part - and I'm one of the guys that fought for them."
To dodge the regulations that they "agreed" to, payday lenders have created a new product called an open-ended line of credit which has no limits on interest rates or administrative fees. Interest rates can top 300% a year and the fees can be oppressive. Of course, you have to be a wily and wise consumer to spot all this in the fine print.
The bastard cousins of payday lenders are the car title lenders. Virtually unregulated under Virginia law, car title lenders entice people with ads showing them buying new clothes or taking a vacation... just bring in your car title (and a set of keys for the day we repossess your wheels) and walk out with a fist full of green! Car title lenders charge interest of 25-30% per month. If the borrower pays only the minimum he gets to keep the car, but his debt can double in six months. Fail to pay the minimum and you'll be walking.
Senator Puckett was shortsighted and too trusting of the wolves last year, but has now seen the light and wants the General Assembly to take action. Senator Mark Herring (D-Leesburg) introduced SB 1490 that would cap car title lenders and anyone making loans under the opened-ended credit laws to a 36% APR. It is in the Commerce and Labor Committee. More info.
But, just a year after the payday loan battles ended with a wimpy law, and in a session where the budget is sucking all the media and legislators' attention, there may not be much will to act. Terry Kilgore (R-Scott Co.), chair of the House Commerce and Labor Committee which handles such bills, was noncommittal. Senate Majority Leader Richard Saslaw (D-Fairfax), who is cozy with payday lenders, has introduced a bill providing more cover for the industry. He would prohibit a company from offering both payday and open-ended laws - so his buddies will just offer the usurious open-ended ones.
Not taking any chances, the industry has lavished cash on legislators. According to the Virginia Public Access Project, Loan Max, the biggest of the title loan lenders, has donated $530,000 since 2002, about equally split between the parties. The three biggest payday lenders have ponied up $370,700 over the same period.
Hey Richmond! We'll be saying "I told you so" again in 2010 if you shirk your duty this year. We may talk to members of the House of Delegates in November! Do the right thing - put a cap of 36% and reasonable limits on fees (better yet, require they be computed as part of the APR). SB 1490 seems like a good place to start.

No comments: