House Bill 2563 Stricken from CalendarFebruary 6, 2007
House Bill 2563, the payday lending industry's so-called "reform" bill, was stricken from the docket rather than allow restructuring of the industry to occur. On Saturday, February 3rd, the 72% cap was put on as an amendment to curb abuses. Payday lenders charge more than 10 times the interest of any other small loan lender.
The Payday Loan Debt Trap: How It Works
Payday lenders target Virginia's working families many of whom live paycheck to paycheck. For example, the average salary for a firefighter in the Richmond area is $38,310 annually, or $1473 every two weeks before taxes. If a financial emergency occurs and he or she takes out the maximum amount of $1500 in payday loans (3 loans at $500 each = $1500) plus $225 in fees ($75 per loan x 3 loans = $225), the amount due at the end of 2 weeks will be more than the firefighter's biweekly salary. As a result, the borrower will be forced to reborrow the money, paying an additional $225 in fees while still owing $1500 in principal. This cycle will continue until the borrower is able to work his or her way out of the debt.
The average payday borrower takes out 8 payday loans each year from a single lender, and an estimated 13 loans when multiple lenders are taken into consideration.
Virginia's working families deserve fair credit options, not payday lenders whose profits depend on trapping working families in debt.