Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.
Regrettably, Virginia has earned the title of the “East Coast capital of predatory lending.” Fortunately, Virginia Attorney General Mark Herring is working to fix that.
What’s the problem?
According to Virginia’s State Corporation Commission:
[I]n recent years, Virginia-based payday lenders have annually made more than 440,000 loans totaling more than $170 million to more than 137,000 borrowers. The borrowers take out an average of more than three loans a year to stay afloat at an average annual interest rate of 289 percent. Virginia-based car title lenders also issued more than $206 million in loans in 2013, up from $180 million in 2012, to more than 150,000 borrowers, with an average APR of 216 percent. More than 17,000 borrowers had their car repossessed and more than 13,000 had their car sold.
Predatory lenders have flocked to Virginia because surrounding jurisdictions, such as Maryland and DC, have enacted stricter laws, including laws that cap interest rates. Virginia has 20 licensed payday lending companies and 28 licensed motor vehicle title lending companies. Virginia also has open-end lenders that are effectively unregulated.
Right here in Arlington there are branches of the car title lender Title Max at 5265 Lee Highway and 3045 Columbia Pike (“If you are in need of some fast cash”). For pay day loans, you can choose from several Arlington options, including ACE Cash Express at 311 N. Glebe Road or Advance America at 2514 Columbia Pike (“It Only Takes 10 minutes. Apply Now”).
What’s the solution?
Attorney General Herring has committed to focus on a wide range of strategies, including:
- Enforcement Actions, using his office to crack down on lenders violating existing laws.
- Consumer Education, providing assistance to create financial literacy courses and credit mentoring guidelines to community organizations.
- Partnerships with the federal Consumer Finance Protection Bureau (CFPB), other states, advocacy groups like ProgressVA, and other stakeholders to take action against lenders operating across state lines.
- New Virginia Legislation, based on what’s working in other states, what new enforcement authority is needed by the Virginia Attorney General’s office, and what loopholes lenders have found in current Virginia law.
- Alternative Lending Solutions, exploring ways to help consumers gain access to affordable, non-predatory low-dollar loans, and reducing the number of individuals and households that cannot borrow or cannot borrow enough through traditional banks.
Attorney General Herring’s partnership with the CFPB is particularly promising. The CFPB is the federal agency whose creation was championed by now-Sen. Elizabeth Warren after the 2008 financial collapse. The CFPB is considering new federal rules to curb predatory lending.
CONCLUSION
Congratulations to Attorney General Mark Herring for his progressive leadership in targeting predatory lending in Virginia.
Peter Rousselot is a former member of the Central Committee of the Democratic Party of Virginia and former chair of the Arlington County Democratic Committee.