New legislation passed through the legislature to cap interest rates on "predatory loans," capping them at 36 percent plus up to $25 per month in fees.
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From the State Capitol in Richmond, I’m Craig Carper.
Two bills have been sent to Governor Ralph Northam’s desk that would reign in interest rates on so-called predatory loans, capping them at 36 percent plus up to 25 dollars per month in fees.
These include payday and car title loans as well as internet and line of credit loans which currently average 200-300 percent interest.
The industry says they provide a valuable service by extending credit to low income borrowers with bad credit who would not otherwise be able to qualify for a loan. Critics say these loans can trap borrowers in a cycle of debt that is difficult to get out of.
Dana Wiggins, with the Virginia Poverty Law Center says the legislation allows borrowers to make smaller payments over a longer period of time, with no prepayment penalty.
“The bills that made it through the process preserve access to credit but have significantly reduced the costs to borrowers, meaning that they’re going to be about 3 times less than they were being charged right now for the same kinds of loans.”
The bills will not go into effect until 2021, so that new lenders can enter the marketplace and become licensed to operate under the new guidelines.
For Assembly 20, I’m Craig Carper.
