The Virginia Supreme Court ruled last week that when a payday lender “makes a loan to a borrower immediately after the borrower repays in full a previous loan,” that second loan was made in violation of the 2002 Virginia Payday Loan Act.
An estimated 9.2 million of those type payday loans were made between 2002 and 2009, when a new law passed by the Virginia General Assembly forced payday lenders to wait one day before making a new loan to a borrower. The Supreme Court ruling didn’t address whether loans made the next day could also be considered an unlawful loan refinancing or extension.
“I am pleased that the Virginia Supreme Court recognized that payday lending in Virginia has largely been an illegal scam,” said Jay Speer of the Virginia Poverty Law Center.
Advocates of payday-loan reform feel the high court’s decision should put legislators on notice that the predatory lenders cannot be expected to follow the law when “reform” measures are passed.
“The only way to effectively regulate predatory lending is to return to interest rate caps that worked well before the General Assembly started creating all these exceptions for payday lenders and others,” said Dana Wiggins, coordinator with the Virginia Partnership to Encourage Responsible Lending.
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