Payday-Lending Info Debated
Industry representative blasts proposal to require oral notice for borrowers
A public hearing yesterday on the state's new payday-lending law generated debate on how much information given to borrowers is too much.
The hearing was held by the State Corporation Commission on regulations developed to implement the law.
A payday-lending industry representative blasted a proposal requiring lenders to provide oral and written notice about options that give borrowers more time to repay loans.
"A Miranda warning for borrowers" is the way Reggie Jones, a lawyer for the Community Financial Services Association, described the proposed requirement that borrowers get a detailed oral explanation of their payment options. The association's members account for about half of the loan volume in Virginia, he said.
Payday lending is a $1.36 billion business in Virginia, involving 84 loan companies with 832 offices across the state in 2007, according to a commission report. For 3.6 million payday loans made to 449,860 Virginians last year, the interest per loan averaged 359 percent, according to the commission.
Jones described the oral notice as "too much information" that will make borrowers' eyes glaze over. It will slow down the loan-making process and is not business-friendly, he suggested.
David Clark, a lawyer for Virginians against Payday Loans, defended the notice, saying its purpose was to draw borrowers into a discussion with lenders.
Borrowers need more information, not less, added Mark Hubbard, a Richmond consultant representing the Raleigh, N.C.-based Center for Responsible Lending.
The state's tighter payday-lending law takes effect Jan. 1. Its provisions include:
- A prohibition on lending to borrowers who already have one unpaid payday loan;
- An opportunity once yearly for borrowers to use an extended-payment plan to repay a payday loan; and
- A 45-day cooling-off period for borrowers who take out five payday loans within a 180-day period or an opportunity for those borrowers to use an extended-term loan followed by a longer cooling-off period.
In a payday loan, a borrower writes a check to the lender for the loan amount plus interest and can either pay off the loan or let the company cash the check to satisfy the loan. The new law extends the repayment time to two pay periods.
Source: inrich.com
