Republicans beholden to title loan sharks

LoanMax, the car title loan outfit with dozens of stores across the Commonwealth, is banking heavily on a GOP win in November.

Right after the Republican Convention nominated Ken Cuccinelli, E. W. Jackson, and Mark Obenshain, Select Management Resources LLC, operator of LoanMax outlets, took the trio barnstorming across the state. Wonder why didn't they use some of the cars they've repossessed? The trip, which was by air, lasted three days and took the candidates to various cites on a "meet the voters" tour. Bet there were few customers of LoanMax in those audiences!

Such a trip isn't cheap and that is probably a good indication that LoanMax wants even less oversight than the little they currently have in the Commonwealth. The payday and title loan business model typically preys on the uninformed and those in need to lock them in a cycle of high interest and unreasonable fees. So much better if nobody is watching the henhouse!

According to the Virginia Public Access Project Cuccinelli and Obenshain reported in-kind donations of $9,000 for the trip. However, Jackson, the lieutenant governor candidate, reported nothing. It isn't the first time Jackson has neglected to report contributors. And, he has previously been fined by the State Board of Elections for failing to make timely reports.

So, we have a GOP ticket with cozy ties to a predatory industry that takes advantage of Virginia residents. That's enough chicken litter to sink most campaigns but read on.... 

Ken Cuccinelli's ethics continue under intense scrutiny for the thousands of dollars in gifts he received (many unreported until he was called on it) from Governor McDonnell's friend Jonnie Williams.

And in Rev. Jackson we have a candidate who plays fast and loose with money and the truth. Wonder who counts the cash in his offering plate?

You'd have to be a dumb cluck to support this ticket!

Pecking at the payday birds

SB 1470 has passed the General Assembly and will soon be on the governor's desk. It prohibits payday lenders from offering open-end lines of credit. The predatory lenders began offering these lines of credit after the legislature placed modest limits on their lending practices. The open-ended loans have no cap on interest and their use is generally seen as a way to dodge the law passed last year.

But, there is something fowl about this bill - it does not include any regulation of increasingly pervasive car title lenders. Virginia should have real limits and real regulatory teeth of both payday and car title lenders. Governor Tim Kaine hasn't said what he'll do with the bill. Sign it and accept a half-baked bird.... err, bill that may take the wind out of the wings of future action. Or veto it and tell the legislature to get it right next year.

Given that this is Kaine's last year, that the predators will probably lavish House candidates with grist this November, and we don't know who will be the commonwealth's Big Bird this time next year, CCC urges Governor Kaine to sign SB 1470. A glass half full is better than one totally empty.

Fox in the General Assembly Hen House

Predatory payday and car title foxes appear to have again snuck into and out of the Richmond hen house with all the eggs.

CCC has often commented (here's one) on the payday and car title lenders shameful practices that rip off consumers - usually ones who have fallen upon hard times and don't take time to understand the consequences of dealing with these predators. This year, our lawmakers, who are supposed to look out for the common good, have again helped these foxes to all the eggs they want.

This session there were bills to regulate these lenders and to end the use of open-end loans which came into use as a way to dodge last year's weak regulations. The industry responded by deploying a dozen or more lobbyists to prowl the halls and elevators of the General Assembly Building, reminding legislators of past campaign contributions and the promise of more to come. Lobbyist Jeff Smith, representing the Virginia Financial Services Association, a group representing small lenders which are not involved in payday or car title lending, warning that the bills would knock those lenders out of revolving loans and could affect employment at HSBC, a British bank with a processing center in SE Virginia.

Smith was either wrong or conveniently misrepresented the truth - HSBC would not be affected by the bills. More troubling is Smith's apparent amnesia about his also representing Consumer Loans of America, one of the nation's largest payday and car title lenders.

It is easy chop off Jeff Smith's head for his "lobbying" activities. But, it is far more appropriate to ask our legislators what the cluck they are thinking. Or, if they are thinking at all. I guess they were just too busy denying the right to vote to former felons, making sure Virginia remains a right-to-work state, and teaching elementary kids about all the benefits of marriage to enact some reasonable restrictions on these vicious predators.

More info in prior posts and here.

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.

Greed Is Good

In Wall Street, Michael Douglas electrifies viewers with his passionate defense of greed.

While self-interest drives all us, the past year has amply demonstrated how excessive greed, unregulated greed, immoral greed can bring down not only a nation's, but the entire global economy.

As the new Obama administration moves to replace blind laissez-faire with reasonable regulations of banking, securities, mortgages, Wall Street, etc., it is time for the Commonwealth of Virginia to attack those purveyors of greed still among us - the payday lenders, the car title lenders, and others who similarly prey on those who are desperate or poorly informed about prudent borrowing.

Last year the General Assembly "regulated" payday lenders with toothless legislation such as limiting loans to $500 and having one loan at a time. Already these predators are bypassing those ineffectual laws by offering open-ended loans that are virtually unregulated and can have interest rates of over 450%. Payday lenders also worked hard to water down truth-in-lending requirements - no sense in telling unsuspecting borrowers about the bottomless pit. 

I doubt the payday lending industry will bring an entire economy to its knees in the same way the self-indulgent fools in the mortgage industry did, but there can be no doubt that payday lenders have no moral barometer when it comes to wrecking an individual's personal economy.

Since the payday loan industry is obviously based on excessive and immoral greed, and it cannot and will not regulate itself, now is time for the General Assembly to act. A basic consumer protection demands the state put a 36% cap on interest that may be charged. That is the same rate cap the state has for other types of small loans. It is reasonable. It protects the vulnerable. It is good policy.

Who should the General Assembly protect? The greed merchants or the people?