Earlier this year, Virginia lawmakers were considering several bills that would have cracked down on the car-title lending industry, a business that’s come under increasing scrutiny and mounting criticism. None of those bills passed, although two powerful state senators wrote a letter to regulators asking them to take care of it. Now Michael Pope has the latest twist in the ongoing investigation - state regulators now say they don’t have the authority to take action.
It’s been more than four months since two leading state senators asked state regulators to crack down on the car-title lending industry, and yet the State Corporation Commission has yet to take any action. The commissioner of financial institutions says he’s studying the issue and working on a report. Meanwhile Governor Terry McAuliffe says he’s considering executive action.
“I am not shy about taking executive. I will lean in on what is in the best interest of the citizens of the commonwealth."
And, McAuliffe says, that means taking action against an industry he calls predatory.
“I find it highly offensive. I think they prey upon folks who are in a weak and vulnerable position, which is the last group of individuals that you want preyed upon."
For years, businesses like TitleMax and Fast Auto Loans were engaged in what many senators called a bait-and-switch operation. Walk into one of their locations intending to get a car title loan and you just might walk out with a different kind of loan - a largely unregulated lending product known as a consumer finance loan.
"I felt the Bureau of Financial Institutions should have stepped in and shut it down as soon as it started. But they basically allowed it to continue and they are still allowing it to continue."
That’s state Senator Scott Surovell, a Democrat from Fairfax County.
“They were evading Virginia law. And the Bureau of Financial Institutions has said basically we don’t care. And they are continuing to say we don’t care."
Earlier this year, lawmakers were considering a bill that would have eliminated the ability of a business like TitleMax to have licenses for more than one kind of loan. That effort was scuttled when two leading state senators sent a letter to state regulators asking them to revoke dual licensing authority. Now leaders at the State Corporation Commission say they won’t be doing that because the General Assembly didn’t pass a new law.
“The State Corporation Commission and the Bureau of Financial Institutions have consistently shown a very hands off attitude when it comes to anything involving predatory lending. They seem to be highly tolerant of all kinds of egregious behavior."
Delegate Dave Albo, a Republican from Springfield, disagrees.
“Oh I don’t think they’re a shill for the industry. I think that they are very careful in making sure they have statutory authority."
More to the point, Albo says, he disagrees with those who are calling for more regulation on an industry they call predatory.
“In a free country, you are free to make good decisions and you’re free to make bad decisions, and I don’t think the government should be telling people what they can or can’t do regarding their own finances."
In the week before the General Assembly session began, title lenders gave $35,000 in campaign contributions even though the campaign ended back in November. The largest contribution came the day before session started from LoanMax to the Senate Democratic Caucus - a group whose leader negotiated the deal killing all the reform efforts.
“Those with the least access and the greatest need for protection always have a difficult time to get any level of government to act."
That’s Frank Shafroth at the George Mason University Center for State and Local Leadership.
“Government is not as responsive to those most in need. It generally tends to be more responsive to those with the greatest access to policymakers."
Republican Senator Frank Wagner is chairman of the committee that oversees regulation of the industry. He says he’s disappointed regulators didn’t take action this year, but he says there’s always next year.
“If they haven’t fixed the problem by the time we come back for the next session I think we, rather than leave it to the SCC to figure out, we’re just going to put in legislation to make sure they can offer one product or the other but they can’t offer both at the same location.”
The debate over predatory lending isn’t just happening here in Virginia. It’s become a national conversation, one that’s just beginning to take shape at the federal level. That’s where the Consumer Financial Protection Bureau is considering a new rule that would force some lenders to prove borrowers can pay back loans before any money changes hands.