Legislation aimed at reigning in high-interest loans will get attention in the state Senate later today.
When a pipe burst in James Johnson’s house in Hampton, it flooded with water and sewage. He needed money fast. So he went online and started looking for loans.
“And so sure. I wanted the money. I wasn’t concerned about reading the fine print or anything.," Johnson says. "The only thing I was concerned about was getting the money because I needed cash desperately.”
He wanted to clean up the mess in his house. But, after the immediate crisis was over, he realized he made a mess of his financial situation.
“That’s when I became aware of the fact that they charge 399% on loans," he explains. "And I said, ‘oh my goodness. I wish I would have had known that.’”
Now he says he realizes the loan he took was predatory.
“Predatory loan companies, they prey on people, vulnerable people who are in dire situations,” Johnson says.
Lawmakers are considering a solution to help Johnson and all the other people who have taken high-interest loans and found themselves in a debt trap.
Delegate Lamont Bagby of Henrico County has a bill that would limit all loans to 36% and create a monthly cap of fees at $25.
“And so hopefully we will reach a conclusion in which everyone can be happy," Bagby says. "But if anyone’s going to be happy, I hope it’s those individuals that have been preyed upon.”
Bagby’s bill isn’t making everyone happy. One of the bill’s opponents is Robert Baratta, a lobbyist for a high-interest lender called Check Into Cash.
“We have 29 stores, all of which will close," he explains. "We’ve run the numbers and they cannot operate brick and mortar and offer the types of loans they do and expect to get a positive rate of return on it.”
Closing the doors of all those high-interest lenders is kind of the point says Delegate Mark Levine of Alexandria.
“They are giving them loans they know they can’t pay back," Levine says. "They are taking vulnerable people and making them even more vulnerable, and I have no sympathy for those lenders.”
Car-title lenders and payday lenders might end up closing their doors. But other businesses say they would come to Virginia if lawmakers pas Bagby’s bill.
One of those is James Gutierrez, CEO at Aura Loans.
“We have not begun lending in Virginia because the statutes today don’t really enable our type of responsible, small installment loan," says Gutierrez. "We would love to enter the state, and so we highly support this bill.”
The bill has already passed a House Committee on a party-line vote, and supporters feel confident about its prospects in the House. But Senate Majority Leader Dick Saslaw is chairman of the committee that’ll hear the bill on the Senate side, and he took $25,000 from LoanMax in the last election cycle, according to campaign-finance reports.
“Generally I have not supported bills that put people out of business. So we’ll see,” Saslaw says.
Supporters of the bill have another concern, a separate bill they worry will create new loopholes for companies that offer high-interest loans. If that bill passes, they say, Bagby’s bill won’t mean all that much.