By Diane Bayer, Minister of Christian Formation at the Muhlenberg Lutheran Church in Harrisonburg and leader of the Harrisonburg affiliate of the Virginia Interfaith Center for Public Policy.
Imagine you lose your job, need a major car repair or are facing a sudden illness, and you have no savings and a poor credit rating. People do what they must to survive and many are forced to turn to payday and car title lenders in Virginia who offer quick cash with no credit check, charging 300% or more interest on the loan.
Payday lenders promote “easy” loans for workers who run short of money between paychecks and agree to repay the debt within a short time. A few weeks often turns into years and borrowers become caught in a debt trap that leads to a cycle of poverty that can cause financial ruin and tear families apart. Driven by the threat of a lawsuit or the fear of bounced checks, payday borrowers are often forced to pay their interest fees before they pay their rent, utilities and even buy groceries.
I join with faith leaders and advocates from different faiths across the Commonwealth to speak out against this unethical and cruel practice of predatory lending. We are working with the Virginia Interfaith Center for Public Policy and the Virginia Poverty Law Center, to call upon Virginia’s legislators to enact laws to protect consumers from these predatory lenders. We see our congregants and community members becoming trapped in a cycle of debt and this must stop.
Virginia is a very friendly state for predatory lenders who prey on vulnerable people in crisis. Our state has some of the weakest consumer lending protections in the country. For example, every year, hundreds of thousands of Virginians take out these loans and end up paying up to three times more for credit than borrowers in other states, according to a report from the Pew Charitable Trusts. Payday and car title lenders in Virginia charge an average of 251% for payday loans and 217% for car title loans.
One of the most shocking facts is that lenders in Virginia can charge unlimited interest rates for loans above $2500 (a practice that is prohibited in 39 states). One resident from Columbia, Virginia said, “Because I needed the money right then, I agreed to the loan’s requirements. Only later did I realize the six-month $900 loan would actually end up costing me $3,019.22 at an interest rate of 638.7%.”
Virginians are being cheated, misled and often threatened by high-interest car title and payday lenders. Rev. Bill Faw, a member of the Harrisonburg/Rockingham Interfaith Association, said, “It’s like you are borrowing from a loan shark and you are afraid for your life.”
The situation in Virginia is dire but there is hope in the General Assembly. Senator Mamie Locke and Delegate Lamont Bagby have introduced Comprehensive Predatory Lending Reform bills (SB 421 and HB 789). We call upon our legislators to support these bills to protect all Virginians, especially our most vulnerable residents. We must stop the unscrupulous practices of predatory lenders and protect all Virginians from getting caught in a debt trap.