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Mole's Progressive Democrat

The Progressive Democrat Newsletter grew out of the frustration of the 2004 election. Originally intended for New York City progressives, its readership is now national. For anyone who wants to be alerted by email whenever this newsletter is updated (usually weekly), please send your email address and let me know what state you live in (so I can keep track of my readership).

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Location: Brooklyn, New York, United States

I am a research biologist in NYC. Married with two kids living in Brooklyn.

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  • Thursday, March 26, 2009

    VIRGINIA ACTION ALERT: Stop Predatory Lending

    This comes from the Virginia Organizing Project and I think is very relavent given the horrible behavior of companies like AIG, Bank of America and Citicorp. In Virginia there is a movement to stop the kind of predatory lending that led to our economic crisis.

    STOP PREDATORY LENDING: CLOSE THE OPEN-END CREDIT LOOPHOLE, SUPPORT PASSAGE OF SENATE BILL 1490 and SUPPORT PASSAGE OF HOUSE BILL 1809

    Section 6.1-330.78 of the Code of Virginia allows lenders in Virginia to make unrestricted and unregulated open-end loans:

    There is no limit on interest rates.
    There are no licensure requirements.
    There is no state agency oversight and no federal restrictions - - the 36% federal cap on loans to military personnel does not even apply to open-end loans.

    The open-end loan loophole permits lenders to use practices that unconscionably destroy the financial well-being of Virginia families:

    Car title lenders have been using this loophole for several years:
    o They loan up to 50% of the value of a car , put a lien on the car’s title and keep a copy of the keys for easy repossession
    o Despite the fact that the car title loan is a secure loan with little risk involved, they still charge exorbitant interest rates of 25-30% per month (an APR of 300 -360%).
    o They also charge borrowers upfront fees of $50-$100 called “membership” fees
    o If the borrower misses a payment, even after paying interest for many months that exceed the amount borrowed, the lender can repossess the car

    Recently, payday lenders in Virginia started using this loophole to evade the new moderate payday loan restrictions that took effect January 1, 2009.
    o The Richmond Times-Dispatch recently reported that 75% or more of payday lending offices have started offering open-end loans.
    o Payday lenders are steering borrowers to their new open-end loan product.
    o They are charging interest up to 465% APR for an open-end loan.

    Virginia borrowers are being financially abused by the open-end loan process:

    So many cars are repossessed by car title lenders that one car auction located near Roanoke devotes one day each month to auctioning off cars repossessed by a car title lender.
    Most Virginians rely on their cars as a means of transportation to and from work, school, healthcare, etc.
    Without a vehicle, victims of car title loans may lose their jobs because of missed work and their inability to meet basic needs.

    Senate Bill 1490 will stop payday and car title lenders from exploiting this loophole and financially ruining Virginia families:

    It places car title lenders under the Consumer Finance Act and applies the interest rate established therein to all car title loans, regardless of the amount.
    It forces payday lenders to comply with the restrictions enacted during the 2008 session.

    Senate Bill 1490 and House Bill 1809 represent the best approach to tackling open end credit loan abuses:

    Legislative efforts to close the open end credit loophole for payday lenders ONLY will not fix the problem.
    Payday lenders can evade this type of measure by giving up their payday loan licenses and providing open end loans exclusively.
    A Car Title Loan Act would result in a huge expansion of these lenders, leading to years of legislative battles over reform.

    1 Comments:

    Blogger CarmanK said...

    Predatory lending has to end. It is immoral and unjust and illegal. The loansharks like Bank of Skank(America) Citi and Chase cannot be allowed to continue raising credit card fees etc... payday loans are loan sharking, and if it is damaging to the military, it is damaging to the rest of us. Go VA do something to help stimulate the economy, stop the robber banks from charging outrageous fees, eating up whatever few extra dollars are to be in workers' paychecks with the stimulus. Predatory lending will stifle the stimulus recovery and prolong the recession. It has to stop NOW, 2010 is too far away.

    9:36 PM  

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