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Military loses to payday lenders

February 20, 2006 - Hampton Roads, Virginia

The payday loan industry has exploded in Virginia, and there's been plenty of collateral damage to the financial health of the enlisted servicemen who call the commonwealth home.

But given a choice between doing right by the military and doing right by a new industry that preys upon them, the General Assembly -- predictably -- has again sided with the predators and their enormous campaign contributions.

And this from politicians who never miss an opportunity to brag about how much they support the troops.

Payday loans work like this. Let's say you're a little short of cash one week. You go to a storefront , and you get money you'll have to repay with your next check, in a couple weeks.

But when your paycheck arrives, you can't afford to repay the loan. So you have to take out a new loan to pay off the old one. Pretty soon you're doing that every couple of weeks, at an annual interest rate that approaches 400 percent.

That's right. Borrowing $500 for two weeks from Advance America, for example, will cost $75, an annualized percentage rate (which the company helpfully discloses on its Web site) of 391.07 percent.

Rather than dealing with the usury for which the General Assembly gave the loan companies permission, Virginia lawmakers can't even be moved to nibble at the margins of the problem.

Newport News Del. Glenn Oder had introduced legislation that would've provided some limits on the industry, including requirements that borrowers wait a day between loans, and that lenders offer a repayment plan.

In order to get even those modest measures to the House floor, Oder was forced to strip an important provision that would've created a database to allow the state to more effectively track the industry and the loans it issued. Oder promised other lawmakers that he'd kill the bill if there was an attempt to toughen it.

There was.

Del. Kenneth Alexander represents a bunch of the people who've suffered at the hands of these companies. To his great credit, the Norfolk lawmaker wasn't happy with any half measures to protect his constituents. He planned to reintroduce the database provision, and Oder, true to his word, had no choice but to kill his own bill.

"He realized what was going to happen. I was going to win," Alexander told the Daily Press of Newport News. "I was up all night, working on my presentation (to the House). I was ready. We have to protect families of low and moderate income, and military families, who are being hit by these predatory lenders. This bill didn't go far enough."

Alexander is right on that score. Both he and Oder say they'll be back next year with another payday lending bill.

Good luck to them. This is a wildly unregulated industry that makes money by taking it from the poor, from the young, from people who don't know any better -- in other words, from the people who can least afford it.

It's nice to know that at least a couple of legislators are willing to stand with them. The sad thing is that there aren't more.

News Source

Virginian-Pilot, Editorial

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