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Lawmaker takes interest in car-title, payday loans

August 4, 2006 - Hampton Roads, Virginia

Last month, Del. Glenn Oder sat down with a car-title loan officer to find out how many ways he could get fleeced.

To be fair, Oder doesn't characterize it as a fleecing. He considers it more of a fact-finding mission.

The Republican from Newport News did so because he plans to champion bills curtailing car-title and payday lending in this state. He's concerned that increasing numbers of desperate Virginians face financial ruin at the hands of loan companies offering quick cash at crushing interest rates.

So he put his own car on the block -- hypothetically speaking.

"If I was going to get a loan," he told the loan officer, "I'd like to know more about the process."

True to form, the guy lowballed him on the car's value, then offered him an annual interest rate in the triple digits.

"My immediate impression of that was, there's a lot of value left on the table," Oder says. "It was pretty clear where this was headed."

About that time, Oder resurrected his bill to restrict payday loans. He's working on another bill to restrict title loans.

A similar payday loan bill died a painful death in the House this year, but Oder believes he has the support now to get it passed in 2007.

The bill would limit an individual to a total of three outstanding payday loans, for a total indebtedness of $1,500. It would also build a statewide database to track loan activity.

Basically, the bill would stop consumers from taking on too many of these egregious loans at one time -- not make the loans any less egregious.

It's not perfect, but it's a start. And, as Oder noted, anything can happen in the sausage factory of state government -- even, perhaps, capping annual interest rates to a fraction of the 360 percent or more that ensnares many desperate Virginians in a bear-trap of debt.

Oder sounds like a guy who empathizes with folks who need a last-ditch, short-term loan for medicine or rent or food, and just can't get it elsewhere. He also recognizes the risks.

"There's no doubt this is swimming in very, very deep water. With an undercurrent," Oder says. "I can see where it fills a need in the marketplace. Philosophically, while I wish this wasn't here, while it is here it clearly needs to be regulated."

Oder told me this Wednesday after he read my column warning the General Assembly that it was hell-bound for failing to protect Virginians from legalized loan sharks. He wanted me to know -- and I concur -- that not all immortal souls in Richmond are at risk.

But while Oder tackles the problem from the demand side, legislators must also tackle it from the supply side.

Cap those damnable interest rates. Let the sharks know that low-income Virginians aren't for sale anymore, no matter how lucrative the campaign contribution.

Who knew it would be such a tough sell?

Del. Harvey Morgan, R-Middlesex, sponsored a bill last session to cap rates at 36 percent. It couldn't make it past a House subcommittee.

It was Morgan who authored the bill several years ago that ushered payday and car-title lenders into the state in the first place. By last December, as evidence mounted of the havoc such loans were wreaking, Morgan declared, "I'm not sure we did the right thing."

Morgan can do the right thing now and push his bill hard come January.

His colleagues should do the right thing and approve it.

Can't be done?

Bilge.

Florida, for instance, capped APRs for title loans at 30 percent for the first $2,000. Amounts between $2,000 and $3,000 top out at 24 percent. Any amount over $3,000 is capped at 18 percent.

The rate for title loans in Florida used to be 22 percent a month, says Bob Tedcastle, bureau chief of the state Office of Financial Regulation. Legislators tried and failed for years to lower it. Finally, in 2000, they succeeded.

Virginia lawmakers can see how Florida's law works by going online to the Florida attorney general's Web site for the document called "How to Protect Yourself: Title Loans."

As the site explains, if you borrow $1,000 in Florida and pay it off in 30 days, you owe $1,000 plus $25. If you pay it off after a year, you owe $1,000 plus up to $300.

Compare that to the Virginia woman profiled in Sunday's Daily Press who borrowed $2,950 against her car. Ten months later, her debt exploded to more than $12,500.

These are the wolves that Virginia lawmakers sicced on their own constituents.

Many lawmakers did so unwittingly. Others weren't so naive.

Later this month, Oder plans to confer on his payday bill with the Virginia Interfaith Center for Public Policy, a nonprofit advocacy group active on this issue.

In October, Morgan plans hearings in Richmond for testimony on payday and title lending.

The mission is clear and the proselytizing has begun.

Good news, senators and delegates: salvation is at hand.

News Source

Daily Press, Tamara Dietrich, Staff Columnist

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