Putting a Cap on Payday Lenders

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Updated: 8:01 PM Nov 7, 2007 Putting a Cap on Payday Lenders Payday lenders are often accused of pushing people into a cycle of debt and now Charlottesville city councilors are urging the general assembly to put a cap on the high interest rates these companies charge. Posted: 7:18 PM Nov 7, 2007 Reporter: Lisa Ferrari Email Address: lisa.ferrari@wcav.tv

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November 7, 2007

Payday lenders are often accused of pushing people into a cycle of debt and now Charlottesville city councilors are urging the general assembly to put a cap on the high interest rates these companies charge.

In fact cities across Virginia are asking state law makers to put a cap on payday loan rates.

These initiates have failed in the past, but two local women caught up in the loan cycle hope law makers don't fail them now.

“They are not loan sharks but they might as well be loan sharks because your just as dead when you get into pay day,” said loan customer Belinda Carter.

Belinda carter and Thomasine Wilson are just two of many people who thought payday loans would be a temporary fix to financial problems but instead got stuck in a cycle of debt.

“You hooked once you in it,” said Carter.

“It got really frustrating like where's all of my money going,” questioned Thomasine Wilson.

Pay day lenders charges a $15 fee for every $100 cash advance and the loan and the fee must be paid back within two weeks. Calculated as an annual interest rate, it’s upward of 400%. Belinda Carter started with a four hundred dollar loan and says she ended up paying close to two thousand dollars.

“You think about paying that extra back and then you need it for something and you can't pay it back so you have to reborrow the money,” said Carter.

Statewide there's a movement to crack down on what some call abusive practices. Charlottesville city councilors have joined many cities in calling on the general assembly to cap pay day loan interest rates at 36%. Pay day lenders say that would send them out of business.

“They're not going to go out of business,” said Shelly Murphy of the Piedmont Housing Alliance

Detractors say it can't happen when repeat borrowers like Belinda and Thomasine spend two years getting out of debt.

“If you don't have a pay day loan don't get one,” advises Wilson.

Some other Virginia localities have set up zoning ordinances that prevent these businesses from operating. Charlottesville has yet to take that step.

According to the Center for Responsible Lending, borrowers who receive five or more loans a year account for 90 percent of the lenders' business.

The Virginia Organizing Project is just one of many local organizations pushing for the cap. For more information go to www.virginia-organizing.org

Latest Comments

Posted by: walker Location: va on Nov 9, 2007 at 05:57 AM

You can argue about the number all you want but the State Corporation Commission has the numbers collected from the payday lenders themselves. The AVERAGE Virginian gets more than 8 loans per year from the same payday lender and that number is much higher if you consider how many borrowers go to more than one payday lender. This is the dirty little secret the payday lenders don't want you to know. They also don't want you to know what happens when you try to get out of this vicious cycle but that is another story....go to www.faithfulpledge for that story.

Posted by: bob Location: VA on Nov 8, 2007 at 07:24 AM

I had worked for a large payday lender. Your "facts" are wrong. Close to 50% of customers have 5 loans a year - NOT 90%. A 36% "annual rate" (APR) on a two week loan of $300 is $4.50 - It costs that much to get your own money from an ATM if you were to take 2 withdrawals! And, why don't I see any stories on outlawing the bank industry's overdraft fees - they are HIGHER than a Payday Loan and the people that are hit with those are getting hit more than 8 times a year - most of the time without choosing to do so. Finally, Stop the cr*p about "a $300 loan cost me to lose my house and I had to pay thousands" - BULL. How much did the big screen tv, new car, beer cigarettes and eating out cost? My bad, maybe you shouldn't have chosen to take out a loan you knew you could not pay back?! I have had loans, even a title loan - and survived. Now I don't need that financial tool. I have my finances in order. Why don't I see any stories like that?

Posted by: Donna Location: Charlottesville on Nov 8, 2007 at 07:19 AM

Theres more to this story. Actually its not that it has to be paid back in 2 weeks because those that get paid monthly only pay once a month and they pay the same amount that you pay every two weeks. this is unfair. Example if you borrow 500.00 you pay back 575.00 weather you get paid every two weeks or once a month. So those people that get paid every two weeks pay 150.00 for a month and those that get paid every month only pay 75.00 for the entire month. So if there are going to be laws made about payday lending this needs to be addressed as well.

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