Payday Loan Times

Cynthia Smith is a fan of payday cash loan outfits, despite interest rates 10 times what other lending institutions can charge.

“I think it’s wonderful for peo ple that need the money,” Smith told The Richmond Times-Dispatch as she left a payday loan branch on West Broad Street in Richmond. “A lot of people live day to day.”

Smith, a chef, was unmoved by arguments that borrowers paying an annual percentage rate of 380 percent often end up trapped in a cycle of borrowing and debt.

“The banks make it hard,” she said, “because you have to go to [payday advance lenders] to get what the bank won’t give you.”

However, the Virginia Partnership to Encourage Responsible Lending would challenge Smith’s view with stories from people who say payday lending has landed them in a financial hole that is hard to climb out of.

The partnership includes a diverse coalition from the communities of commerce, faith, civil rights and social activism. As the General Assembly convenes today for its 2007 session, the partnership again is supporting the efforts of Del. John M. O’Bannon III, R-Henrico, to repeal the Payday Loan Act of 2002, which legalized the short-term, high-interest same day payday loans.

Despite the opposition, repealing the law will be a tough job.

“The General Assembly is business oriented,” said Del. Dwight Clinton Jones, D-Richmond. “The General Assembly is not about to, in most instances, do anything to move against anybody making a profit. It’s very difficult once a business is established, no matter what the business, to dismantle it.

“The [cash loan online] lending business should not have been codified. But once it’s been codified, it’s been institutionalized.”

Jones said he has been working for three or four years without success to repeal the law, “and my prediction is it won’t be won this session as well. But I think the sentiment is strong that even if we don’t repeal it, we can do some things to limit it.”

According to the partnership, there are around 800 cash advance payday loan stores statewide - two for every McDonald’s and three for every Starbucks.

Payday lenders use a check as collateral for a two-week loan.

“They essentially tell you to write a bad check in order to get a loan,” said Jay Speer, executive director of the Virginia Poverty Law Center. “They take people who are desperate for cash for whatever reason, and they get them in this thing they can’t get out of.”

The Center for Responsible Lending reports that 99 percent of payday loan customers are chronic borrowers.

“This is so morally bankrupt and so clear there is no defense of this,” said the Rev. C. Douglas Smith, executive director of the Virginia Interfaith Center for Public Policy.

Payday lenders, he said, “have institutionalized taking advantage of people in their time of need.”

After some members of the military lost their security clearance because of financial problems, Congress capped small, fast cash loans to members of the military at 36 percent, effective in October.

Don’t civilians deserve the same consideration?