Saturday, 17 March 2007

Families stuck in payday lending trouble

From The Roanoke Times, Saturday 17th March

Helen O'Beirne

O'Beirne is responsible lending coordinator for the Virginia Partnership to Encourage Responsible Lending.

The bad news: Predatory payday lending is still alive in Virginia, at least until our next General Assembly session. Every year this problem goes unaddressed, payday lenders strip $160 million in excessive fees from the paychecks of hardworking Virginians.

The good news: People are getting it. Gov. Timothy Kaine gets it. He publicly declared his intention to impose a limit on the amount of interest payday lenders could charge.

Members of the House of Delegates get it. They passed an interest rate cap of 72 percent for payday loans -- still twice the normal usury limit for Virginia's small loan companies, but a much more reasonable rate than the 400 percent payday lenders typically charge.

And the general public gets it. Concerned citizens from across the commonwealth continue to voice their discontent over the exploits of payday lending. Faith groups call it usury, moral outrage. The business community is ashamed to be associated with payday lenders. Labor leaders decry the maltreatment of their members.

This issue is not going away. Including Virginia, legislators in at least 13 states have introduced legislation this year that would place similar interest rate caps on payday and car title loans to all their citizens. Virginia's General Assembly was the first legislature to consider such a measure in 2007, and could have been the first to enact the law, providing true leadership in a movement that continues to grow across the country. But the payday industry hijacked the process, using a slick public relations campaign and lobbying blitz to push its own idea of "reform."

There was a reason they were so willing to accept these so-called reform measures -- each had been tried in other states, and each had failed to stop the abuses. In other words, the payday lending industry's version of reform was a package of half measures that, at the end of the day, would allow them to conduct business as usual -- debt trap and all.

When it became clear that the industry was never interested in real reform that addressed the abusive aspects of payday lending, Kaine called their bluff and announced his objective to amend the bill when it reached him by adding an annual interest rate cap of 36 percent. If it's good enough for military families, its good enough for all Virginians, the governor told the press.

The industry killed the bill rather than agree to this cap.

Payday lenders depend on repeat borrowing and exorbitant interest rates for their survival. But these elements are what makes payday lending so financially devastating. Giving an industry built on loan flipping an exemption from the state's interest rate cap was a bad idea in the beginning, and it's still a bad idea today.

Virginia's firefighters, police officers, teachers, nurses and service workers all deserve to keep their hard-earned cash for real needs, rather than handing it over week after week to predatory lenders who have them caught in a trap.

This issue is sure to be on the agenda next year. The industry will again try to head off real reform by offering weak provisions that don't threaten their ability to operate loan-flipping businesses. And a strong and growing coalition of advocates from every point on the political spectrum will return with new energy.

It can't come soon enough. Every day that payday lending isn't brought under control, another hard-working Virginian is paying exorbitant interest and cycling deeper into inescapable debt traps that spell financial ruin for their families.

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