›› It's time to take action against payday lending
Date published: 1/22/2008
IF WE LEARNED anything from the 2007 subprime mortgage debacle it should have been this: Irresponsible lending hurts people and ultimately, the economy. For that reason, the General Assembly should corral the payday-loan industry with a firm hand this session.
Payday loans are short-term, unsecured loans which proponents say are a boon to people who find themselves needing cash between paychecks. Medical emergencies, auto repairs--any unanticipated expense can be handled in a 15-minute visit to one of these storefront lenders.
If that sounds attractive it's because you haven't heard the rest of the story: The typical two-week loan costs the borrower $15 per $100--which comes out to a whopping annual interest rate of 391 percent. Payday-loan advocates say that that's misleading, because these loans are short-term. But all too often, borrowers find themselves getting a second loan to pay off the first and a third to pay off the second--until they find they are in a downward spiral of perpetual debt.
Virginia opened the door to payday loans in 2002; by 2006, consumers were $1.3 billion in hock to these companies. Alarmingly, over 96,000 people carried 13 or more of these loans that year.
There are two dozen bills in the General Assembly to regulate or outlaw the payday-loan industry. Some, like that proposed by Del. Lee Ware, R-Powhatan, would establish a database of borrowers so the industry could track loans, limit the number of concurrent loans to two, and establish a one-day cooling-off period between loans.
Other measures would cap the industry's annual interest rate at 36 percent--the same rate other lending institutions are allowed. That, advocates say, would drive the payday-lending business out of the state.
Come to think of it, that's not a bad idea.
Source:
http://www.fredericksburg.com/News/FLS/2008/012008/01222008/350227 |
