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Payday lenders’ ally now upset

A powerful ally of payday lenders is furious over the industry’s perceived end-run on new restrictions on high-cost instant loans and is vowing to block it.

Senate Majority Leader Richard L. Saslaw, D-Fairfax, said he is writing legislation to prohibit lenders from offering so-called open-ended loans with potentially unlimited fees.

Saslaw’s bill—and a similar measure by Del. G. Glenn Oder, R-Newport News, an industry foe—would restrict lenders to payday loans, which a law that took effect Jan. 1 seeks to control through complex repayment rules and higher fees.

The perception that payday lenders are trying to elude a hard-fought clampdown fashioned last year is inflaming lawmakers in both parties.

It threatens, as well, to hasten controls on car-title lending, another industry seen as ensnaring the poor and uneducated in debt.

Should restrictions favored by Saslaw and Oder become law, lenders are not ruling out the possibility they would dump their licenses to offer payday loans to focus, instead, on the pricier open-ended loans.

“That’s a question we certainly can’t answer right now,“ said Jamie Fulmer, spokesman for Advance America, the nation’s largest payday lender.

Saslaw, who has defended payday loans as a necessary option for the cash-strapped and has taken thousands of dollars in contributions from lenders, said they “severely damaged” their credibility by seemingly bypassing the new rules.

Open-ended loans have been approved by the State Corporation Commission for the operators of 617 fast-money stores, about three-quarters of Virginia’s total.

Payday loans are limited to $500 and typically are repaid within two weeks. Open-ended loans—essentially a line of credit—are restricted to $750 but can carry higher fees and longer repayment schedules.

Source: http://www.newsadvance.com