Now that newly passed regulations have severely hampered the payday loan industry in Virginia, lawmakers are setting their sights on car title lenders.
A legislative study committee held its first meeting today at the state capitol to discuss how to approach regulation of car title lenders during the 2010 General Assembly session.
Car title lenders operate under the state’s open-end credit law, which allows them to impose whatever loans terms they want as long they do not charge anything during the first 25 days.
Since Virginia passed laws against payday lending, the number of loans has dropped more than 80 percent from the previous year.
From the Associated Press story via the Times-Dispatch:
Last year, Virginia’s payday lenders made nearly 3.4 million payday loans, or about 281,000 each month. Through the end of May, lenders had issued 226,807 loans, an average of 45,000 per month — an 84 percent decline, according to the Bureau of Financial Institutions.
The number of stores in Virginia has declined more than 36 percent.
With payday lenders fleeing the state, cash-strapped residents are turning to car title lenders.
And so are opponents of payday lenders.
From the Virginia Poverty Law Center:
Like other types of predatory lending, car title lenders charge a ridiculously high interest rate on its borrowers — 300% to 360% APR. If the borrower cannot pay off the high-cost loans, then the lender repossesses the car of the borrower. Many times, borrowers take out these loans in the first place because they need money quickly. Because of this, lenders target certain groups such as low-income individuals, the elderly, immigrants and military members.
For more reading, check out previous BizSense coverage on the payday loan industry:
Va. regulations chasing payday lenders away
Now that newly passed regulations have severely hampered the payday loan industry in Virginia, lawmakers are setting their sights on car title lenders.
A legislative study committee held its first meeting today at the state capitol to discuss how to approach regulation of car title lenders during the 2010 General Assembly session.
Car title lenders operate under the state’s open-end credit law, which allows them to impose whatever loans terms they want as long they do not charge anything during the first 25 days.
Since Virginia passed laws against payday lending, the number of loans has dropped more than 80 percent from the previous year.
From the Associated Press story via the Times-Dispatch:
Last year, Virginia’s payday lenders made nearly 3.4 million payday loans, or about 281,000 each month. Through the end of May, lenders had issued 226,807 loans, an average of 45,000 per month — an 84 percent decline, according to the Bureau of Financial Institutions.
The number of stores in Virginia has declined more than 36 percent.
With payday lenders fleeing the state, cash-strapped residents are turning to car title lenders.
And so are opponents of payday lenders.
From the Virginia Poverty Law Center:
Like other types of predatory lending, car title lenders charge a ridiculously high interest rate on its borrowers — 300% to 360% APR. If the borrower cannot pay off the high-cost loans, then the lender repossesses the car of the borrower. Many times, borrowers take out these loans in the first place because they need money quickly. Because of this, lenders target certain groups such as low-income individuals, the elderly, immigrants and military members.
For more reading, check out previous BizSense coverage on the payday loan industry:
Va. regulations chasing payday lenders away
so are we just going to push the poor to a loanshark. I mean high intrest rates and losing your car are bad but, isn’t using an illegal loan shark. These people need money. They will find it somewhere and that somewhere might be with a shilock. Why must we regulate the behavior of consenting adults. The Va poverty law center needs to take into account a repo is far better than “”biggie” paying a visit and breaking a few bones to keep the loan payments coming in.These people took out these loans, nobody forced them. It seems to me… Read more »
Very interesting article Al. Brevity is your hallmark. Perhaps a follow up would be in order. You could address how this legislation will help those who no longer have access to credit. I am sure they anticipated what will happen when 3.1 million Virginians are cut off from credit. Where do these people go for credit? How will the lack of it affect their lives, impact their communities, alter their economic behavior? Who is next to feel the wrath of the State after the Car Title lenders? Perphaps the Credit Card Companies like Capital One will have their fees and… Read more »
First the payday lenders, then the title lenders, then the pawn brokers, and soon the unbanked will have no legal alternatives. Then they will borrow from ACTUAL loan sharks. Do you think people will just stop needing money if you legislate these businesses out of the state? I totally agree with Medved. Running these lender off sends many people’s legal alternatives away with them. Helping the unbanked requires providing access to credit, this is doing the opposite.
The car title loan industry can hardly be called legal, would you encourage a financially strapped person with no credit to sign up for a loan @ 287% APR, $11/day interest. With no chance of ever being able to pay it back.
Loan Sharks would have better terms than that, this is a legal industry that is preying on the desperate. It does not help them if they just end up losing their vehicle.
The industry is no better than loan sharking, the terms of these loans are criminal, and prey on the desparate.
Someone without money being able to pay back a loan at 287% interest, is impossible, the practice of lending money to people who cant afford to pay it back and have nothing already is criminal and predatory.