It would put a one-year limit on the loans, set up a maximum interest rate and require the lenders to be licensed.Now, if we could just get something done on payday lending.
Currently the lenders are unregulated, charge more than 300 percent annual interest and can repossess a borrower's vehicle if he falls behind on the payments.
Supporters said the reforms would protect borrowers from an endless cycle of debt while stopping short of running the lenders out of the state.
"I told the title lenders, if you don't want the front of your place looking like a used car lot, don't make loans to people who can't repay them," said Senate Majority Leader Richard Saslaw. "This also tells the people who are going to borrow that you need to understand that if you don't make these payments you will lose your car, but you won't be making payments forever."
Saslaw cited the example of a Harrisonburg man who took out a $1,500 car title loan, paid $380 per month for about a year, and after paying more than $4,700 he still owed the $1,500 principle.
In Saslaw's bill, lenders could charge between 15 percent to 22 percent per month, depending on the amount of the loan. The companies could not lend more than 50 percent of the vehicle's value, and borrowers must own the car.
It would require the loan be repaid in full within one year, and at least 8.25 percent of the principle must be paid each month. Saslaw said those provisions would put a stop to endless payments that never reduce the amount that is owed. - The Daily Press
Friday, March 12, 2010
Paring Back Aggressive Lending
In all the bluster over civil rights and budget fights, it is nice to see something good come out of the Virginia General Assembly for a change. In this case, an agreement to rein in the massive overcharging of citizens who take out car title loans.