Va. House approves bill to allow car-title lending to out-of-state drivers
Monday, February 21, 2011; 7:16 PM
RICHMOND - A bill to allow car-title lenders to extend credit to out-of-state drivers squeaked through the Virginia House on Monday, overcoming objections from a bipartisan group of delegates who argued Virginia should respect the laws of neighboring states that have banned car-title lending.
The measure would overturn a new state regulation adopted in October that prohibited car-title lenders, who offer quick cash to people who put their cars up as collateral, from extending loans to owners of cars titled in other states.
The bill had emerged with little debate from the Democratic-led state Senate last month, where it was sponsored by Majority Leader Richard L. Saslaw (D-Fairfax).
But it encountered stiffer resistance Monday in the GOP-led House of Delegates, where it was adopted on a narrow 51 to 47 vote only after delegates conducted a lengthy debate that reflected unusual political alliances.
Critics of the industry say it preys on those desperate for fast cash, extending short-term loans that carry extremely high interest rates to those least able to repay them. Borrowers who fall behind can lose their cars, which they often need for employment.
Officials in the District and Maryland, which have both adopted usury caps that have essentially stamped out car-title lending in their jurisdictions, had said they were concerned about the Virginia effort, fearful that it would encourage their citizens to cross into the commonwealth for fast cash.
Consumer advocates have said they believe the industry is protected by hefty campaign contributions. Registered car-title lenders have given Virginia politicians and parties more than $1 million since 2004.
Del. G. Glenn Oder (R-Newport News), a longtime opponent of car-title lending and the related industry of payday lending, waved aloft a stuffed shark - a loan shark - on the floor of the House. License plates from Virginia's neighboring states dangled from the prop's neck.
"If you want to expand car-title lending - if you want to see car-title lenders do more loans in the state of Virginia - then you want to vote yes," he challenged colleagues.
The bill's supporters argued consumers are protected by regulations adopted by the General Assembly last year. Car-title lenders must alert borrowers in writing that the loans carry high interest and that it is in a borrower's best interest to pay such a loan off quickly. The lenders can't extend credit for more than a year, meaning loan obligations can't be endless.
Supporters of the measure also said that lawmakers did not anticipate that the State Corporation Commission would interpret the regulations to bar lenders from making loans to out-of-state drivers that they are legally allowed to offer to Virginians. And the bill's backers contended that borrowers know what they're getting into and that it was intrusive for the government to set up hurdles to getting loans.
"If you're a moral busy-body and you insist on substituting your moral judgment, your financial judgment and your fiscal judgment for those of every other person in the Commonwealth, then vote against the bill," said Del. William R. Janis (R-Goochland), urging the bill's passage.
The bill adopted by the House differs slightly from the version the Senate approved. The Senate will almost certainly accept the House's tweak, made at Saslaw's recommendation, and send the bill to Gov. Robert F. McDonnell (R) for his signature or veto.
A spokesman for the governor said McDonnell is reviewing the issue.