House Committee backs payday loan reform bill

By CHELYEN DAVIS

Date published: 2/14/2007

RICHMOND

The bill yesterday survived a House committee that did not make threatened changes that would have prompted the bill's sponsor to kill it.

The House Commerce and Labor Committee approved Sen. Dick Saslaw's bill, which limits customers to three loans at a time, prohibits them from taking out another loan on the same day they pay one off, and requires a database to keep track of it all.

A similar House bill had already passed the committee, but its sponsor had it stricken when it was amended on the House floor to limit the interest rate payday lenders can charge.

Saslaw had threatened to do the same thing if the committee made any such amendments to his bill.

But they did not. Del. Jennifer McClellan, D-Richmond--who had initiated the interest rate cap amendment to the House version --said she may seek other changes to fix the problems she has with Saslaw's bill.

"I'm not sure this bill goes far enough to solve the repeat borrower problem," McClellan said. "But I recognize this is a process, and what comes out of this committee today may not be what we end up with."

Payday loans--short-term loans of about two weeks that provide customers with quick cash for a set fee of $15 per $100 borrowed--have been available in Virginia since 2002. Since then nearly 800 payday loan stores have opened, although laws prohibit payday lenders from providing loans to military personnel.

Opponents of payday lending say the fee amounts to usury, and they cite examples of customers who got themselves trapped in a cycle of debt. They want payday lending abolished, either outright or by virtue of capping the interest rates at a level payday lenders say is too low to allow them to stay in business.

Several bills were introduced to ban the industry in that way. But those have all died in committees, in favor of bills like Saslaw's that apply some new restrictions to the industry.

"There's only so much we can do here," Saslaw said. "There's got to be some degree of personal responsibility."

Chelyen Davis: 804/782-
Email: 9362cdavis@freelancestar.com

Date published: 2/14/2007