“When Pauline H, then 95 years old, moved back to Virginia so her grandson could help care for her… she took out what she thought was a ($450) payday loan. A year later, she had paid $597 toward her $450 loan and the lender, Allied Cash Advance, said she still owed $776.”
He borrowed $100 from a small loan company called Advance ‘Til Payday …. Four months later, he had racked up $320 in fees and still was unable to pay off the original $100.
These borrowers thought they were getting payday loans but instead they got these unregulated loans called line of credit or open-end credit loans made mostly by former payday lenders. Many of these loans are advertised as payday loans or structured just like payday loans. They are called line of credit loans just to evade Virginia law.
Sadly, payday lenders are incredibly creative and persistent with their quest to evade Virginia usury law. When payday lending first came to Virginia about 20 years ago they tried the rent-a-bank deception to evade our usury laws that have been in place for hundreds of years. That deception got the Virginia General Assembly to pass the Virginia Payday Loan Act in 2002 to license and regulate payday lending. However, the payday lenders forced borrowers into back-t0-back loans in violation of the law and engaged in other abuses so the General Assembly made changes to the Payday Loan Act in 2008. What did the payday lenders do? Many of them changed their loans to follow the law but some of them decided to use the open-end credit trick to evade the new law—a trick they learned from the car title lenders. The Virginia Poverty Law Center, legal aid and private attorneys and the Virginia Attorney General’s Office have filed numerous lawsuits on behalf of the borrowers harmed by these unlawful loans practices but they continue. The Virginia Poverty Law Center and the Virginia Attorney General’s Office have urged the General Assembly to put a stop to this toxic debt but still it continues.
Meanwhile an increasing number of online payday lenders have started trying to use the open-end credit deception to evade our usury laws. The Virginia Poverty Law Center and the Virginia Attorney General’s Office have sued some of these lenders but it continues.
We need help! The Virginia General Assembly needs to pass the Bills that will be introduced this year that will make all payday lenders follow the same rules and not allow these “line of credit” loans to continue unregulated.
“Do we live in a country where capitalism can be balanced with accountability and responsibility? Do we live in that America? I don’t know.” Maybe we may find some answers to this borrower’s question during this General Assembly session.