New crackdown on payday lenders heads to Kaine

Del. Glenn G Oder, R-Newport News (right), sponsor of the payday loan legislation, talks earlier this session with Del. Terry G. Kilgore, R-Scott.

By: JEFF E. SCHAPIRO TIMES-DISPATCH STAFF WRITER | Times-Dispatch
Published: February 25, 2009

New restrictions on payday lenders cleared their final legislative hurdle today.

The Senate sent Gov. Timothy M. Kaine a measure designed to thwart an end-run by lenders on separate restrictions that took effect barely two months ago.

The latest proposal prohibits most lenders from getting around a $500 cap on loans by peddling open-ended loans that carry sky's-the-limit interest.

Further, lenders who give up their payday licenses to offer open-ended loans, which typically start at $750, couldn't get those licenses back for 10 years.

The legislation is designed to force the state's payday lenders to operate under a hard-fought clampdown passed by the 2008 General Assembly. It kicked in Jan. 1.

But even before that, the State Corporation Commission had given the green light to three-quarters of the state's 800 cash stores to offer open-ended loans.

It's not clear what Kaine will do when he gets the latest legislation, fashioned by Del. G. Glenn Oder, R-Newport News, a foe of lenders, and Senate Majority Leader Richard L. Saslaw, D-Fairfax, once among the lenders' closest friends.

Kaine could simply sign the bill into law. Or he could propose revisions, perhaps even additional controls on the high-cost, instant loan industry.

In other action, the Senate sent Kaine compromise legislation that could force the auto industry to share millions in federal handouts with dealers who get stuck with scrapped vehicle lines as well as parts and tools.

The bill raised eyebrows because one of its sponsors, Senate Republican Floor Leader Thomas K. Norment Jr. of James City, is a co-owner of an ailing Dodge dealership in Yorktown.

Norment has said he does not have a conflict of interest in carrying the proposal because it applies to all 520 new-car dealers in Virginia, not just his.

Kaine's office played a major behind-the-scenes role in the dealer legislation. It was fiercely opposed by car makers, including Volkswagen, which Kaine lured to Northern Virginia from suburban Detroit.