Gov. Bob McDonnell has signed a bill into law that will allow car title lenders to extend credit to out-of-state drivers, lifting a six-month-old ban on such loans that had been imposed by state regulators.
Consumer groups had called on McDonnell (R) to veto the bill, arguing that Virginia should respect the laws of neighboring states that have essentially banned car title lending for their residents. Car title lenders offer drivers quick cash at very high interest rates if they put their vehicle up as collateral. Critics charge that they take advantage of the desperate, who often lose a car they need for employment when they cannot make loan payments.
The bill had been sponsored by Senate Majority Leader Dick Saslaw (D), who also sponsored a bill a year ago that imposed new restrictions on car title lenders and had been interpreted by state regulators as banning loans to out-of-state drivers.
Saslaw argued that it was never the intent of the General Assembly to prohibit lenders from making loans to out-of-state drivers, a rule that would mean that loans that could be legally offered to Virginians could not be offered to residents of others states. And he contended that government should not prevent people from getting loans they may need in times of hardship. He said car title loans offer better terms than street lending, and his measure last year provides new consumer protections, like requiring that loan terms last for no more than a year.
The measure had received overwhelming support in the Democratic-led Senate but passed after a tough legislative battle on the floor of the House of Delegates. Consumer groups said Monday they were disappointed McDonnell did not veto the measure.
“This is very discouraging that Governor McDonnell and many legislators would go out of their way to pass legislation helping this business whose sole purpose is to exploit the economic hardships faced by many people,” said Dana Wiggins, a spokesperson for Virginia Partnership to Encourage Responsible Lending, in a statement.