Give Payday Lenders an Inch… And They’ll Water Down Legislation

“Give them a stick with which to whack vulnerable Virginians, and they’ll pick up a crowbar.”

It turns out the Daily Press (Newport News, VA) isn’t about to mince words regarding the payday lending industry in Virginia. Like many states around the country, Virginia recently wrestled with regulating payday lenders, but the General Assembly failed to pass the strict 36% interest-rate caps that have effectively put the industry out of business in other states. From a January 7th editorial:

And how did the payday lending industry respond after legislators caved to its aggressive lobbying and generous checkbook? It went for more.

Some payday lenders have started offering open-ended loans as a way around the few safeguards the General Assembly imposed on payday loans, such as limiting borrowers to one such loan at a time and capping loans at $500. Inexplicably, open-ended loans are virtually unregulated in Virginia, so lenders can really sock it to borrowers on interest and terms. Now, borrowers who are already teetering on the brink of financial disaster can, with the eager help of a payday lender, hurl themselves over the edge with an open-ended loan at an equivalent annual interest rate of more than 450 percent.

As they say, read the whole thing.