Payday Loan Times

Unlike his Staunton counterpart, Del. Steve Landes said he would support a cap on faxless payday loans.

In the past, Landes said he has been one of the legislators who have said that something needs to be done about the high-interest loans and has co-patroned legislation to do away with payday lenders and set caps on the rates that they can charge.

“The cap is at least the minimum that we should do,” Landes said in a phone interview last week.

City Council will decide today whether to approve a resolution that would asking the General Assembly to cap all consumer instant cash loans at 36 percent throughout the state.

In an interview, Del. Chris Saxman said that while he supports reform legislation, setting a specific cap on what a business can charge would set a dangerous precedent.

Landes said this is the first time he has heard of a locality drafting a resolution about payday loans. Localities have taken similar actions with immigration, but the issue is usually something that impacts the locality. This resolution is different because it is more of a statewide issue, he said.

It is always good for local governments to express their viewpoints, but there is not a lot that they can do with this issue at the local level.

A 36 percent cap is reasonable, Landes said. However, he said he would be willing to consider capping the payday advances at a higher rate if that would get something done on the issue. In the past session of the General Assembly, legislators considered capping rates between 36 and 72 percent.

“If there needs to be some negotiation, I’m willing to look at that,” he said. “We’ve not been able to get the payday lenders to agree to some level that most people would believe is fair.”

There are people who want to use a high-interest loan services, Landes said. In order to survive, cash loan lenders need to charge higher rates than other businesses.

“They don’t operate like banks so they can’t be treated just like banks or other lending institutions,” he said.
However, there needs to be a limit for these higher rates, he said.

Landes referenced the federal Talent-Nelson Act, which limits interest rates at 36 percent for military payday loans.

“I think it’s only fair that we do that for the general public as well,” he said.

The problem with such loans is they snowball, Landes said.

“Once they don’t make payment once, it keeps building and building and building until they dig themselves into a hole.”

Landes said lenders should not be rolling over no fax cash advance lenders in Virginia.

“Fortunately, there are people who follow the law, but there are also people who don’t,” he said. The illegal rollovers would not have as much of an impact if the rates were lower, Landes said.