The loans would be from $100 to $500 and have an APR of 24.99%. Payments will be debited from the borrower's VACU account. There will be no credit check and only one loan at a time will be allowed. There are other qualifications and details here.
So, is the Commonwealth now in the payday lending business? Yeah, I guess one could say that, but there are differences. The interest rate, while still higher than I want to pay, is way under the rates charged by the loan sharks in the gaudy buildings found in most cities. Borrowers have to learn a little personal finance and maintain an account at VACU.
I'm sure some wing nuts will scream about the state competing with private businesses, but that isn't exactly accurate. VACU is not a state agency, but rather a credit union like many others affiliated with businesses and governments. The financial literacy aspects of the program are a big plus and not something the predators are likely to offer since the first lesson would be don't borrow from these crooks.
We'll have to wait and see how successful the Virginia State Employee Loan Program is and how many employees take advantage of it. But, it does provide a trial run and a good model for other organizations who may be interested in providing fair and reasonable small loans. This may be the first step in controlling the blight of payday and car title lenders.
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