The chambers of the General Assembly of Virginia have passed identical bills affecting payday lending in the state. The bills were enrolled, or printed in the form that the chambers voted to approve, on Saturday, March 8.
The bills embody eight principal changes to Virginia’s existing Payday Loan Act, found in Chapter 6.1 of the Virginia Code. They do not affect licensing requirements under the Code. The following are the key provisions of the proposed legislation:
- Payday Fees Increased: The maximum loan fee is increased from 15% to 20% of the loan amount. The licensee may also charge: (1) a maximum of 36% interest, calculated at a simple annual rate and (2) a verification fee of no more than $5 to offset the cost of database queries.
- Payday Loans Limited: A payday loan customer may not: (1) have more than one payday loan outstanding or (2) renew or extend a payday loan except pursuant to a repayment plan (discussed below).
- Payday Database to be Established: Licensees are required to query an industry-wide database, which must be operational by January 1, 2009, to determine applicants’ eligibility for a payday loan. If a customer takes out or repays a payday loan, or enters into an extended payment plan, the licensee must report the event before close of business.
- PDL Maturity Dates Extended: Payday loans must have a maturity date that produces a loan term of “at least two times the Borrower’s pay cycle,” an ambiguous standard that will prove particularly troublesome in the context of non-employment-related income, such as receipt of government benefits.
- Customer Repayment Plan Rights Established: A customer has the option of converting any payday loan to a non-interest bearing extended payment plan by agreeing in writing to repay the loan in at least four equal installments over an aggregate period of at least 60 days.
- Electronic Funds Transfer Prohibited: The licensee may not obtain authorization to draft funds electronically from the customer’s deposit account in connection with a payday loan.
- Fifth Payday Loan: A customer may take not take out more than four payday loans in any180-day period unless the customer is willing to be barred from taking out a sixth loan within 45 days of repaying the fifth payday loan.
- Collection Efforts: Licensees are subject to the restrictions of the Fair Debt Collection Practices Act.
The bills will now be sent to the governor for his signature. If he signs one or both of them, which the governor has suggested is likely, the new provisions will take effect January 1, 2009, except the provision mandating construction of the new database (discussed above), which will become effective July 1, 2008.
The governor may still suggest amendments to the bills before signing one or both of them. If he does, the General Assembly will consider the proposed amendments and accept or reject them.