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Payday loans down 85 percent in Virginia
Far fewer people are leveraging their paychecks to payday lenders to make ends meet these days, as new restrictions cut down on the predatory short-term, high-interest loans.
Despite a deep recession and the layoffs and pay cuts that go with it, payday lending in Virginia plummeted 85 percent from January to May of this year.
In 2008, payday lenders issued almost 3.4 million loans, or 280,000 loans monthly. So far this year, an average of 45,000 loans have been issued monthly in Virginia, said the Virginia State Corporation Commission's deputy commissioner of finance, Susan E. Hancock. The number of loans is not broken down by county.
The number of lenders also has decreased. Last year, 71 payday lenders were writing checks in Virginia; that number has dropped to 51.
Currently, three payday lenders are licensed in Loudoun. Advance America has offices in Leesburg and Sterling, and Checks Mate Inc. is in Leesburg. Repeated calls to the lending offices were not returned.
SCC Commissioner E. Joseph Face Jr. cites the Virginia Payday Loan Act that went into effect Jan. 1 -- not a lack of demand for the loans -- for the drastic decrease. The law limits one payday loan per borrower at one time, limits the borrower to loans on five consecutive pay periods and prohibits a lender from issuing a loan within 24 hours of a previous loan being paid.
Lenders have to check a new database before issuing a loan to determine the borrower's eligibility. Many borrowers do not meet the new criteria.
The new law also caps annual interest rates at 36 percent; previously interest rates on payday loans hovered in the 300 percent range, Face said.
The new crackdown may be pushing lenders to expand into new areas, Face said – some are cashing out on their payday loan businesses in order to offer open-ended, unsecured loans.
Open-ended loans act like a credit card; the debtor establishes a line of credit that can be repeatedly drawn on. These loans are currently deregulated in Virginia.
Contact the writer at hhager@timespapers.com
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