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VA City Takes on Payday Lenders

October 8, 2007

Staunton, VA - Interest rates of more than 300 percent per year are bound to be a hot topic for the next legislative session. The Staunton City Council has passed a resolution urging the state to cap payday loans at 36 percent, a cap that used to be in place -- until the Virginia legislature cleared the way for the payday loan industry to move in.

Staunton City Councilman Bruce Elder says the majority of his constituents are appalled at the payday lending rates.

"Staunton residents just can't believe it. They say, 'It must be against the law!' Well, in 13 states it is. For example, in Georgia it is a felony to do what they're doing right here in Virginia."

The industry argues it is providing a needed service, and capping interest rates would put them out of business. They justify their high interest rates as a necessity to cover their high-risk loans, which are made without credit checks.

Recently, Washington, D.C. passed a resolution that caps payday loan rates at 24 percent. On October 1, a new federal law went into affect that limits payday loans to members of the military and their families nationwide at 36 percent. Elder says these are encouraging first steps.

"It's become a predatory business -- so predatory, in fact, that it has developed into an issue of national security."

Elder says he's heard from city council members all over the state who want to consider the same resolution as the one passed in Staunton.

Deborah Smith/Chris Thomas, Public News Service - VA