I wrote last month at The Liberty Papers about efforts by Virginia legislators to regulate the payday lending industry.? Today comes news that the effort is dead for this session:
RICHMOND - The effort to abolish payday lending died on the floor of the House of Delegates on Tuesday, opponents of the controversial industry conceded, after the author of a bill on the issue asked that it be stricken.
“It’s basically dead for this session,” said Del. Algie Howell, D-Norfolk, a payday lending opponent.
Del. Lee Ware, R-Powhatan, asked that HB2563 be stricken because he said it would eliminate, rather than reform, payday lending.
“That was not the point of this bill,” he said.
Saturday, the House of Delegates voted 55-39 to approve an amendment to Ware’s bill to impose a 72 percent interest cap on payday loans. Ware called the amendment, from Del. Jennifer McClellan, D-Richmond, “abolition in disguise.”
He noted that for a $350, two-week loan, a payday lender would make just $10 under the interest cap. Payday lending interest rates can be as much as 380 percent.
“You can’t make your payroll on that kind of return,” Ware said.
Payday lenders currently make about $75 on a two-week, $500 loan.
Ware’s bill would have limited borrowers to three loans at one time and required the industry to set up a database to track loans. It also would have banned loans to members of the military or their spouses.
A bill similar to Ware’s original bill, SB1014, has passed the Senate.
“But I suspect what happened to my bill will happen to that one when it gets over here,” Ware said. “Reform is likely dead in this session.”
As I noted at The Liberty Papers, the payday lending industry provides a service to people who, because of bad credit, otherwise would not be able to get loans from traidtional sources. Yes, the interest rates are high, but that is a reflection of the risk that the lender is taking in loaning money to someone who historically has demonstrated that they are not a good credit risk.
Or, as Wulf at Atlas Blogged said:
Opponents of Payday lenders point to a lot of alternative sources, but when it comes down to it, they are trying to legislate away one of my options because they think they know what’s best for me, and I don’t. Doesn’t that sound familiar?
Yea, it does.
H/T to Vivian Paige for the link, although we clearly don’t agree on this one.
February 8th, 2007 at 1:55 pm
And opponents don’t tell you that bouncing a check or paying a late/disconnect fee on a utility bill costs way more than a payday loan. And those things also affect your credit score, whereas a payday loan is clean and clear.