Add the Virginia Supreme Court to the list of organizations and individuals that
understand payday lenders are peddling family-crushing debt.
The Virginia Supreme Court ruled last week that Virginia payday loan companies
have made millions of illegal loans. The Court found when a payday lender
"makes a loan to a borrower immediately after the borrower repays in full a
previous loan" that was a violation of the 2002 Virginia Payday Loan Act. That
means Virginia payday lenders made an estimated 9.2 million illegal loans
between 2002 and 2009. (Since 2009 a law change forced payday lenders to
wait one day before making a new loan to a borrower. The Supreme Court's
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
This Supreme Court decision exposes how predatory lenders mislead borrowers
and the public. Payday lenders and other predatory lenders market their loans as
"a short-term loan to meet a financial emergency". But the high court had a better
description of these loans: " … 0 vicious cycle of debt."
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.