Members of the General Assembly are working on legislation to crack down on predatory loans with a focus on something called rent-a-bank.
Like many people who fall on hard times, Aubrey Pena needed money, and she needed it now.
"We were faced with a situation where we were going to be homeless, and we needed a loan to be able to move into our apartment at the time," Pena says. "We needed $3,000."
So, she wanted to take out a car-title loan, but all the locations in Roanoke closed after lawmakers passed a 2020 law cracking down on predatory lending. So, she went online, where she fell victim to what advocates call a scheme that uses out-of-state banks to evade
"What they are trying to do is something called rent-a-bank where you team up with a bank, and in this case it's a bank from Utah, and then you claim that Virginia cannot regulate a Utah bank, and therefore they can make this loan," says Jay Speer at the Virginia Poverty Law Center. "If you really investigate these things, what you find out is that the bank really isn’t making the loan at all, they’re just lending their name to it. Hence the term, rent-a-bank."
That's why his organization is working with Senator Lamont Bagby of Henrico County on legislation closing what they consider a loophole. The legislation requires out-of-state lenders to get a Virginia license and follow Virginia law.
This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.
