Bill Would Put Limits On High-Cost Borrowing
Friday, March 7, 2008
RICHMOND, March 6 -- State legislators agreed Thursday to the nation's most stringent reforms of the payday loan industry in hopes of reducing the cycle of debt for financially strapped customers who repeatedly take out high-interest, short-term loans.
The overwhelming vote by the House and Senate followed years of contentious debate in the General Assembly and a fervent lobbying blitz by payday loan supporters and opponents.
"We are looking at a bill that's the toughest, most restrictive in the country,'' said Del. Terry G. Kilgore (R-Scott), chairman of the House Commerce and Labor Committee.
The bill limits borrowers to one loan at a time, restricts how many they can get in a year and provides them more time to repay the money. Borrowers who take out cash advances against their paychecks would not pay annual interest rates of more than 36 percent, although other fees would increase.
The bill passed the Senate by a vote of 37 to 2 and, later, the House by 91 to 9. Negotiations continued minutes before the votes.
The bills will be sent to Gov. Timothy M. Kaine (D), who has made regulating the payday loan industry a priority. He has 30 days to review the proposal.
"It was very important that a bill got to my desk,'' Kaine said. "The last few years we have missed opportunities because of people digging in their heels."
The payday loan industry has exploded in Virginia since the stores first opened in 2002. About 800 stores disbursed about $1.5 billion last year.
Three states that border Virginia, including Maryland, do not allow payday stores. The District passed stiff revisions last year that have forced some businesses to close.
Jamie Fulmer, a spokesman for Advance America, the nation's largest payday loan company, agreed that the law, if signed by Kaine, would be the most restrictive reforms placed on the industry. He said the changes would translate into at least a 20 percent decrease in revenue for Virginia stores, which could force some to shut down.
"We just don't know how our customers are going to respond,'' he said. "It's too early to tell."
On Thursday, supporters and opponents were unhappy with the compromise bill, but legislators said it was the best deal they could come up with after failing to agree to anything in previous legislative sessions.