Consumer Advocates Fighting Against 'Legal Loan Sharking' - Page 3 of 3

Consumer Advocates Fighting Against ‘Legal Loan Sharking’

Setting Standards

Of the 35 states that allow the loans many, including some local governments, are taking measures to regulate the industry:

Arkansas: Almost all payday lending has been halted in Arkansas as a result of public enforcement by the Attorney General Dustin McDaniel and private litigation. In March, McDaniel sent letters to 156 licensed payday lenders in the state demanding they cease illegal lending practices, essentially bringing the industry to its knees within Arkansas.

South Carolina: In June, lawmakers enacted the first piece of legislation regulating the state’s $155 million-a-year payday industry. The law requires the creation of a database to monitor borrowers’ lending activities; requires the industry to let customers go into an extended payment plan if they cannot meet payment deadlines without incurring any extra fees; restricts payday loans to one loan up to $550 at a time; and imposes a waiting period of one day between loans for the first seven and two days for additional loans.

Kentucky: In March, Gov. Steve Beshear signed into law a bill establishing a statewide database that tracks all payday loan amounts, dates, and borrowers. Beshear expects the system to lead to a 25% to 30% reduction in lending. The database is to ensure borrowers do not have out more than two loans at a time. A 10-year moratorium on new lenders opening in the state is also part of the bill.

West Virginia: Though payday loans are illegal in West Virginia, the state is looking to quash online lending. The attorney general’s office is suing seven Internet lenders for making or collecting online payday loans in the state, in March. Because consumers get the loans while on their home computers in West Virginia, the lenders are subject to state law, says Norman Googel, assistant attorney general.

Virginia: In January, Virginia payday legislation went into effect, limiting borrowers to one payday loan at a time and doubling the amount of time borrowers have to repay the loans, among other changes. With lenders circumventing payday loan regulation by establishing open lines of credits for borrowers, the government has jumped into action, at least for state employees. In July, Gov. Tim Kaine announced the establishment of the Virginia State Employee Loan Program. The program will allow eligible city workers to take out small short-term loans of $100 to $500.