Save yourself no tears for Advance America, Virginia’s largest payday loan company. The company has now decided to flee the Commonwealth before new, stricter General Assembly rules come into effect next year.
You can bet that more than 80,000 Virginians who received payday loansIn 2018 alone, Advance America and similar companies are not taking out the tissues. Instead, these people – who have lost their luck, are grappling with health emergencies, or simply run out of money at the end of the month – give the South Carolina-based company and its colleagues a single-digit greeting.
It is not a gesture of praise.
That’s because payday, auto title, and online lenders in Virginia have done very good business so far. They have received triple digit annual rates on loan to people who usually don’t realize the mess they’ve agreed to until it’s too late.
Many customers then put good money after bad and even take out More Loans to settle their accounts. Meanwhile, borrowers run into debt, fees, and a jacked credit rating.
With the blessing of the Congregation, payday loan companies attractive offer set up business in Virginia in 2002. It wasn’t long before journalists and activists who help the poor heard similar stories of suffering:
Little did I know that the small loan had such hidden, expensive interest rates. The fees and interest are higher than the amount of the original loan. If I don’t pay, companies or their collection agencies will call home and work asking for cash.
Here’s what Spotsylvania’s Lisa Gibbs said to the Virginia Poverty Law Center in comments that were later forwarded to federal consumer advocates in 2019. She had received a loan for dental work:
“Even though the loan was only $ 1,500, interest rates rose until I owed more than $ 5,000,” Gibbs said. “This loan severely damaged my creditworthiness and to this day I am struggling to get approval to buy a home.”
The annual percentage rate that companies were charging approached 400 percent early! Loan sharks would have coveted the legal protection outfits like Advance America and Title Max.
The industry had contributed generously to some state legislatures. Prior to that year, bills often died to incriminate lenders at every meeting of the congregation.
According to a recent Daily Press articlePayday loans are secured by a check for a higher amount. The surcharge and the interest charged by the lenders corresponded to “an annual interest rate of up to 818 percent, according to data from the Bureau of Financial Institutions”.
“Title loans are secured by the borrower’s car or truck. If the borrower misses a payment, the lender can take the vehicle,” the Daily Press reported. “These lenders were allowed to charge interest rates of up to 268%, according to the bureau’s data.”
State records show that in 2018, Auto title lenders repossessed 14,105 vehicles in Virginia. This means that people are losing their main means of transport.
The rules will change on January 1st, when the interest on both types of loans will be capped at 36 percent. Payday lenders can charge a monthly fee of up to $ 25 and auto title lenders a monthly fee of up to $ 15.
The new provisions were supported by both parties.
This finding did not fit well with Advance America, which announced on its website: “The state of Virginia recently passed a law restricting our serviceability. As a result, we are closing our shops. ”
Guess what, if the game isn’t rigged the way you want it in your favor, you’re pouting.
“Other states like Ohio and Colorado have similar regulatory models, but lenders, including Advance America, have been urged to succeed with these products under overly restrictive laws,” said Jessica Rustin, Advance’s chief legal officer, via email. “That experience, along with Virginia’s existing onerous cash needs for licenses, contributed to the company’s decision to cease operations in Virginia.”
However, Jay Speer, executive director of the Poverty Rights Center, told me that these companies still have enough incentives to make money. It’s just that several loopholes have now been closed.
“We filed that bill and had a lot of research and facts from the Pew Charitable Trust,” he said. The result is a fairer process for both lenders and borrowers.
For those on low incomes, it might still be difficult to obtain small loans in an emergency. Banks and other financial institutions are not doing enough to provide money.
What the congregation approved, however, is progress, if not as tough a measure as elsewhere. Many states don’t even allow auto title lenders to operate. Perhaps that’s one reason the Commonwealth is a magnet for some of these companies.
So Advance can get everything under control if it wants. Here is a suggestion:
Don’t let the door hit you on the way out.