Virginia has weaker payday loan rules than most states

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Protesters rally in Winchester to oppose interest rates which can be three times higher than in other states.

While predatory loans exist all over the United States, consumer protections vary wildly from state to state. But those in Virginia are particularly weak.

Hundreds of thousands of Virginians take out these loans each year and can end up paying up to three times as much in credit as borrowers in other states, according to a report of the Pew Charitable Trusts. The researchers write there that Virginia is one of six states with no limit on interest rates for lines of credit and one of 11 states with no cap on interest rates above $ 2,500. As many as one in eight title loan borrowers in Virginia have a repossessed vehicle each year.

It is not just the state government that fails to protect the public from predatory lending. The federal government was supposed to require payday lenders to verify that borrowers can actually repay their loans, but then-Consumer Financial Protection Bureau director Mick Mulvaney delayed and ultimately abandoned the Obama-era rule.

As a result, payday loans are easier than ever to obtain, but can be extremely difficult to repay. The Center for Responsible Lending presented a man who ended up paying around $ 5,000 in interest on an initial loan of $ 300.

The increase in payday loans has led to increased scrutiny from consumer advocates. Last week, a group of protesters gathered in Winchester to demonstrate against Virginia’s lax lending system. The Virginia Poverty Law Center said it organized the demonstration to draw more attention to the issue and encourage the General Assembly to add new protections. They met outside the local branch of Advance America, one of the country’s largest payday lenders.

Jamshid Bakhtiari, Virginia Poverty Law Center’s consumer advocacy campaign coordinator, said the organization’s goal was not to bankrupt Advance America and other lenders.

“We are only asking them to be fair,” he told the Winchester Star. “If they can operate in Ohio and Colorado at one-third the interest rate they operate in Virginia, there’s no reason they can’t change their rates.”

Correction: This story incorrectly identified the organization that produced the payday loan research. These are the Pew Charitable Trusts.


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