Wednesday, February 27, 2008
Editorial: Payday lending reform's uncertain fate
Senate Majority Leader Dick Saslaw, a well-paid industry supporter, may derail reform of predatory lending yet again.
Will Sen. Dick Saslaw kill payday lending reform in Virginia for the second year in a row?
The Democratic senator killed a weak reform bill last year, withdrawing his industry-favored legislation out of fear Gov. Tim Kaine might amend it into something meaningful.
This session, with even more political power at his disposal as majority leader, Saslaw is once again threatening to kill reform.
He's not saying that, of course. Instead, he's urging both sides to find a compromise or he'll refuse to appoint conferees to work out the differences between House and Senate bills.
Never mind that the House bill is a compromise -- one that earned bipartisan support. It would cap annual interest rates at 36 percent, but allow the industry to charge fees that would nearly make up the difference between the capped rates and the effective 390 percent annual rates currently charged. The bill would limit consumers to no more than five payday loans a year and require a 24-hour "cooling-off" period between loans.
The House legislation would enable the payday loan industry to make a profit serving people who need small, short-term loans while making it far more difficult for those people to become trapped in endless cycles of debt.
The bill Saslaw shoved through the Senate, on the other hand, is not compromise but capitulation to an industry that made him its largest recipient of campaign largesse in the last election cycle. Saslaw's preferred approach is no limit on the number of loans and an effective 367 percent annual interest rate on two-week loans. That's reform?
During a committee meeting, Saslaw warned the two sides, "If they don't reach an agreement and this thing gets spilled over, I'm going to personally write a bill neither side will like -- at all."
Somehow, it's doubtful that Saslaw, who received $41,000 from the industry in the last election, would really pen a bill the industry didn't like.
In fact, as Mark Hubbard, a lobbyist for the Center for Responsible Lending, said, Saslaw's posturing seems designed more to send the message that "if it's not an industry-friendly bill, he would prefer to have nothing."
Meanwhile, some legislators were reporting progress on a compromise -- which would further dilute the House bill. If a compromise is reached, Saslaw's reaction will help observers decide if any reform is acceptable to the industry's stable boy.
