Monday, November 26, 2007
Editorial: The payday push
State localities have passed resolutions supporting a payday loan rate cap. Lawmakers, are you listening?
From the RoundTable blog
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More than a dozen Virginia localities recently have passed strongly worded resolutions urging the General Assembly to cap interest rates on payday loans at 36 percent.
Legislators shouldn’t ignore their clear message: Reform a rapacious industry that preys on the working poor.
Legislators for too long have bowed to the industry’s insistence that an interest rate cap would drive payday lenders out of business. Payday loans fill a vital need, some lawmakers maintain.
A need, perhaps, for people caught in financial binds, but not at interest rates that can soar as high as 390 percent. That doesn’t fill a need; it exploits one.
A 36 percent cap certainly doesn’t give the industry the profit that triple-digit rates rake in.
But 36 percent is the rate applied to other lenders in Virginia. The assembly wrongly exempted payday lenders from that cap when it passed the Payday Lending Act of 2002.
Attempts to right the wrong with modest reform failed in this year’s General Assembly session.
Repeating that failure next year would allow the industry to continue employing practices that plunge people into a bottomless pit of debt.
Staunton City Council passed a resolution in September supporting the cap, the first local governing body to do so. Other localities have followed suit, including Roanoke City Council and Pulaski Town Council.
Their resolutions all contain a plea to the General Assembly and Gov. Tim Kaine to “give their earnest attention to these matters at the next regular session of the General Assembly and enact laws that will prevent exploitative payday lending practices.”
A complete repeal may not be possible, but an interest rate cap certainly is. The General Assembly must acknowledge that protecting consumers trumps the desires of an industry that cloaks itself as a consumer good.
Localities are speaking; the assembly ought not turn a deaf ear.
