Supervisors Target Payday Loan Firms
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By Tom Lappas, Henrico Citizen Editor
Henry County, VA, November 17, 2005
The payday loan businesses that have sprung up throughout Henrico County in recent years are preying on the county's poorest, most vulnerable residents - charging exorbitant fees and interest rates - and should be outlawed, according to Henrico's Board of Supervisors.
The Board wants the General Assembly to prohibit payday loan companies from opening any new locations in the state and to establish a "sunset" period to phase out the existing locations. (There are at least nine payday loan companies that operate a total of about 30 locations in Henrico.) Supervisors plan to formally make the request of Henrico County's General Assembly delegation next month.
"It's a license to steal from poor people," Brookland District Supervisor Dick Glover said of the law passed by the General Assembly in 2002 that permitted payday loan businesses to locate in Virginia.
That law capped at $500 the amount that an individual could borrow from any one payday loan company at a time, and it also limited to 15 percent the amount of interest those businesses could charge on loans.
Henrico supervisors are concerned about the effects of those terms on citizens who can't repay their loans within the intended two-week period and then incur additional 15 percent interest fees every 14 days. Translated to an annual percentage rate (APR), the payday loan rate would total 391 percent.
"It's predatory," Fairfield District Supervisor Frank Thornton said of the industry.
Those sentiments aren't new to Patsy Alston, the senior director of public affairs for South Carolina-based Advance America, Cash Advance, Inc. (which operates 11 centers in Henrico, the most of any company).
"We hear that all the time," Alston said. "We do have bad actors in our industry, and they give us all a bad reputation." But, Alston said, the majority of payday loan customers are not poor; in fact, most of Advance America's customers make between $25,000 and $50,000 a year, she said, nearly half own homes and 56 percent have attended college or earned a college degree.
Advance America, which operates more than 2,400 locations in 36 states, requires that its customers prove that they have jobs and checking accounts before they are eligible to receive a loan, Alston said. The company also educates would-be customers about the loans beforehand, she said. Most importantly, the loans are not intended to be long-term in nature, Alston said.
"Our loan is meant to be a two-week loan," she said. "We provide a service that is unavailable to our customers elsewhere, and the numbers show that our customers are happy."
Those who describe the payday loan industry's 391 percent APR as too high should examine other fees in the same light, Alston said. "A credit card late fee is $26 - that's a 678 percent APR. A bank NSF fee is $29, which is a 754 percent APR," she said. "There's no question as to why people would want to do a payday loan as opposed to some of the other options out there."
Henrico's Board will make its request to Henrico's General Assembly delegation during its annual legislative "wish list" dinner meeting Nov. 29 at the Western Government Center.
The payday loan issue is one of 14 topics that county officials hope the General Assembly will address during its 2006 session, which begins in January. Though it's unlikely that the General Assembly would consider changing Virginia Code to make all payday loan businesses illegal immediately or in the near future, it might be more likely to consider imposing tighter limits on the fees and interest rates those businesses charge, County Manager Virgil Hazelett told the Board during a work session Oct. 25.
Henrico Legislative Liaison Linda Robinson theorized that the latter measure might accomplish the desired result by causing some of the businesses to close on their own.
"It would make it so that it's not so obscenely profitable for them," she said. Among other requests on the county's tentative wish list:
* amending state code to correct a loophole by permitting reckless driving citations to be issued to drivers who exceed by 20 miles per hour a posted speed limit between 30 and 39 mph (the same allowance already exists in other speed limit zones);
* amending state code to permit group traffic enforcement - during which one officer observes a traffic violation and then calls ahead to another officer, who apprehends the violator - for all traffic violations. (The change would specifically assist the county in its red-light running efforts, according to Police Chief Col. Henry W. Stanley);
*amending state code to permit family members to be charged as accessories after the fact when police investigations reveal that they have participated in criminal behavior. (The request stems from the investigation of the murder of University of Richmond professor Frederic Jablin, whose ex-wife, Piper Rountree, was convicted of the crime. Henrico prosecutors wanted to file accessory-after-the-fact charges against Rountree's sister but were unable to because of the existing state law).