Virginia House Passes Payday Loan Bill Without Interest Rate Cap

Gov. Timothy M. Kaine’s (pictured, putting out fire) is the last man standing between a bill hand-written by the PayDay loan industry and Virginia consumers.

The bill imposes no limits on the currently 391% interest rates, but do limit the amount of loans allowed to be given to a single borrower. The Washington Post reports,

    “Del. Onzlee Ware (D-Roanoke), a supporter of the bill, said payday loans give poor residents a choice instead of having to rely on charities and churches when they need cash.”

Just like when you swallow poison you can either get your stomach pumped, or you could take an axe and chop it out. — BEN POPKEN

House Passes Payday Lending Reform Bill Without a Rate Cap [Washington Post]

Previously:
Virginia Payday Lenders To Charge Infinity Interest
Do Virginia PayDay Loan Centers Target The Poor?

Comments

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  1. medalian1 says:

    I don’t think anyone here is dumb enough to use a payday loan. I don’t care if they charge 1800% intrest.

  2. B says:

    The issue with Payday loans isn’t that it’s dumb to use them, but that the people who use them are desperate, and the lenders are taking advantage of their desperation.

  3. orielbean says:

    At least when you borrow from the Mafia, they just shoot you when you can’t pay or break your fingers.

  4. acambras says:

    I agree with B. It’s no coincidence that payday loan companies locate their offices in economically-depressed neighborhoods.

  5. wagon says:

    If this blog were concerned with consumers, it wouldn’t actively lobby for taking choices out of the hands of consumers. Sure, these payday loans people are sleazy, but obviously people want to use them, since they’re still in business. If you want people to stop using them, educate rather than advocate the wholesale subversion of consumers’ desires.

  6. j.a.s.o.n says:

    It does not matter if anyone here is dumb enough to use a payday loans.

    1. We, as progressive consumers, should seek to end exploitative and predatory business practices whenever they arise.

    2. Payday loans further depress the situation of already poor people leading to even greater wealth inequality.

    3. The mililtary is a large source of customers for the payday loan industry. As such, the payday loan industry is a national security issue: military personnel trapped into a cycle of debt by payday loans are likely to be distracted from their duties, and have their readiness, effectiveness and ability to deploy be detrimentally affected.

    4. The payday loan industry is essentially legal loan sharking. In fact, modern small loan laws are a byproduct of laws passed in response to the problem of loan sharks. The passage of those first laws was a result of promotional efforts by the Russell Sage foundation. Russell Sage is infamous for creating synthetic loans that loopholed around the interest rate laws of his time.

  7. j.a.s.o.n says:

    In response to wagon: not every choice that exists for consumers is a positive one, and unfortunately the market doesn’t always eliminate the negative ones. Regulation is necessary.

    Specifically, regarding your thought “but obviously people want to use [payday loan lenders], since they’re still in business”, I’ll try to argue against that viewpoint by using another example regarding consumer choice.

    Let’s pretend that we live in a time where the auto industry is almost completely unregulated with respect to passenger safety. If the Consumerist started posting entries actively lobbying for tougher regulations and mandatory implementation of safety belts, would you argue that they are not serving the consumer by removing a choice from the market? Now this example is not too far-fetched. The auto industry was unregulated in the 50s and it was sacrificing safety to keep costs down. Those aware of the issue and able to afford safe cars did purchase them, but the market didn’t eliminate the unsafe cars from the market. It took the advocacy of Ralph Nader to bring the issue to the national spotlight and to get Congress to pass automobile safety laws.

  8. themarkpike says:

    I just posted something about this on a W&M Law School blog. Feel free to check it out:

    http://www.wm.edu/so/acs/?p=55

    These loan shops are everywhere down here in VA. Heavily concentrated around military neighborhoods, and luckily Pres. Bush signed an Act earlier this year to protect military personnel. Now, why not protect the rest of VA’s consumers?

    To quote Del. Ken Melvin, “”You’ve seen the [advertisement] with the perky blonde who says that she needs emergency money for a car repair? Looks like she’s from the Junior League? The likes of her would not get caught dead in one of these joints on the other side of town. And that’s where they are. They’re next to poor people, poor neighborhoods.”

  9. Hoss says:

    Doesn’t sound like Kaine ever took a course in economics. It’s not like payday lenders are making 300 or 1,000 per cent profit. They charge a fee on very risky loans — after the cost of space, employees, other costs and the cost of bad debt — they are left with a profit for the franchise owner. If there is a franchise owner on Block X making $500K a year with tremendous volume and reasonable bad debts — then the market corrects itself — e.g., four other payday stores open on the same block. Legislate a “reasonable” fee and the result is Block X will be left with a couple stores (a few leave as profits are squeezed) and Block Z in the slums is left with no stores since they got really high bad debts.

  10. Its clear. Use your intelligence before applying for such a loan. If you make a mistake its you who is going to suffer. Any how these loans are made for small duration but if extended the amount grows exponentially. I am with Mr. Del. Onzlee Ware statement that at least people has option to think what is right for them. They dont have to rely upon church or charities.