Encouraging Responsible Lending

The Virginia Partnership to Encourage Responsible Lending (VaPERL) is in the business of protecting consumers.  Borrowers across Virginia have suffered from loans from payday lenders and car title lenders, which were unregulated before 2002 in Virginia.  The “Payday Loan Act” of 2002, passed by the General Assembly, instituted reforms that required all payday lenders to be licensed, submit annual reports, and abide by a limit on application fees.  Public advocates against predatory lending continue to fight for reforms as low income Virginians continue to be trapped in a cycle of poverty.  According to VaPERL, most payday lenders rely on their customers to take out 7 to 8 loans a year.  With lenders targeting repeat borrowers and applying annual interest rates that averaged nearly 300 percent, VaPERL led a campaign to reduce the annualized loan rates to 36 percent.  After 57 localities in Virginia supported the 36% cap, the 2008 General Assembly passed legislation that would lower the interest rate cap to 36 percent.  However, due to intense lobbying from the payday lending sector, loan fees were not included in the cap, allowing lenders to once again offer rates that approached the annualized loan rate of 300 percent.