Payday Loan Times

City Council will consider a resolution requesting the General Assembly to enact laws that would cap interest rates for payday advances and other consumer loans made in the Commonwealth.

Councilman Bruce Elder drafted the resolution with the assistance of City Attorney Douglas Guynn. The resolution would recommend that any loans be capped at a 36 percent annual percentage rate.

“This is something my entire council has an interest in getting moved forward,” Elder said in an phone interview Sunday night.

Elder said the resolution is drawn from a Senate amendment that protects members of the armed forces from predatory lending practices such as cash advance payday loan stores.

“We’re trying to encourage the the General Assembly to do what we perceive is the right thing,” Elder said. “To provide the same protection for our citizens that the federal government has provided for military families.”

The Talent-Nelson amendment capped annual percentage rates at 36 percent for members of the military.
According to the site of the Center for Responsible lending, an individual receives a faxless payday loan after writing the lending company a postdated check that is of higher value than the money they will be borrowing.

The site says many customers renew their loans multiple times, with only one-percent of individuals falling in the category of one-time borrowers.

A November report issued by the center states that payday loans in Virginia averaged an annual percentage rate of 386 percent.

“It is my intent to get this before every city council, town council and board of supervisors in the Commonwealth,” Elder said.

The site of the Center for Responsible Lending provides a list of alternatives to payday loans. Examples of options include creating payment plans with creditors, seeking emergency assistance from religious and community groups, and asking employers for cash advances.

“We’re not cutting off people’s chances to obtain emergency cash,” Elder said. “There are other alternatives.”

Elder said he is not trying to put anybody out of business. But if banks, mortgage companies and car dealerships can survive at competitive rates, then consumer lending companies should be able to provide services at 36 percent.

“We have an opportunity to do something here in Staunton that is really groundbreaking,” Elder said. If other localities take similar actions, the General Assembly will take a hard look at legislation, he said.

“My feeling is that when people are down in any way, but particularly financially, you need to give them a hand up,” Elder said. “And not simply to allow them to be taken advantage of further.”