I wonder if they said they were sorry, said Jay Speer, executive director of the Virginia Poverty Law Center.
Its a great situation when the people of Virginia get to finance campaigns of Virginia politicians, said Ward Scull, a Newport News businessman who has been campaigning to tighten regulation of high interest rate loans for years.
He started after an employee asked for a $300 loan, and he learned she was trying to get out from under six payday loans, totaling $1,700, on which she was paying triple digit interest rates.
Payday, car title and other consumer loan companies are major donors to Virginia politicians giving $4.2 million in the past decade, including $230,000 to Saslaw.
I suffer no illusions, said state Sen. Mamie Locke, D-Hampton, as she stepped up to make her case for a 36 percent cap on loans after Saslaw reported the companies promise and the committee shot down a series of four similar bills.
Lockes bill was one of several lobbyists say the largest number seen in recent memory meant to rein in car title, payday and open end credit lenders.
This is the ninth time Ive introduced this bill these loans trap people in a cycle of debt, state Sen. John Miller, D-Newport News, said a few minutes after Locke spoke.
Both senators, along with state Sen. Scott Surovell, D-Mount Vernon, were tackling a problem buried in the fine print of loan paperwork and state law.
The old-fashioned kind of consumer loan, the kind that sets fixed monthly payments over its term, is subject to a 36 percent cap on interest rates for amounts below $2,500. Theres no cap on amounts greater than that, but rates are generally lower for larger loans. These lenders do credit and employment checks.
The rates on loans people borrow against their car titles are capped, too, at a maximum of 262 percent. They cant run for more than one year and bar the lender from suing for any difference between the value of a repossessed car and the amount outstanding on the loan.
Those protections vanish if a car title steers a borrower to an old fashioned consumer loan for more than $2,500.
The limits on payday loans a $500 limit on payday loans and caps on fees go away if a lender steers a borrower to an open end credit agreement. Those agreements are like credit cards, requiring a relative small minimum monthly payment, but the amount owed can balloon as interest piles up, especially since the interest rate routinely exceeds 300 percent.
Loans like that are simply beyond what the lower-income borrowers those lenders target can afford, Scull argues.
Its not just a social justice issue, its a workforce issue, he said.
Lobbyists for the lenders say they provide a service people want and are willing to pay for but one lenders cant afford to make if the state cracks down on rates.
When we talk about an APR (annual percentage rate) of 278 percent, you have to remember that the average term of these loans is 46 days, said lobbyist Reggie Jones.
Payday lenders arent going to make loans for 10 cents a day for $100, which is what theyd receive with a 36 percent rate cap and a ban on charging any other fees, he said.
Saslaw said hes worried that if payday and car title lenders are driven out of the state, that would simply open the door to loan sharks.
You know what street credit is? he said. You borrow $100 on Monday and pay back $200 on Friday, or else bad things happen thats what 36 percent would do.
Ress can be reached by phone at 757-247-4535.