Op-Ed by Bruce Elder
The city of Staunton recently unanimously passed a resolution requesting that the governor and the General Assembly of Virginia strongly consider an interest-rate cap on consumer loans. The resolution was distributed to every city, town and county government in the Commonwealth.
In an effort to provide some background information on why such an action has been taken, I provide this explanation. From 1732 until 2002, the General Assembly of Virginia provided usury protection for her citizens. This protection vanished with the Payday Loan Act. The floodgate was opened, and thousands of quick-cash outlets suddenly showed up overnight. In fact, business is so good that there are two payday lenders for every McDonald’s in our state. These lenders offer two-week loans on postdated checks for a fee of $15 for every $100 borrowed. This is an interest rate of 384 percent APR. If this is the first time you have ever heard this, please read the last sentence again – it is not a misprint. These loans often trap borrowers in a nearly unbreakable cycle of debt.
The situation created is not unique to Virginia; in fact, predatory lending to service members led to the adoption of the Talent-Nelson amendment by the U.S. Senate that limited the amount interest a military family could be charged to 36 percent APR. This law took affect nationwide on Oct. 1.
The General Assembly has the opportunity to extend this protection to all of our citizens and put and end to this abusive practice. If you agree, please take a moment to call your mayor and council and urge them to adopt a similar resolution.
Bruce Elder is a member of Staunton City Council.
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