A powerful ally of payday lenders is furious over the industry's perceived end-run on new restrictions on high-cost instant loans and is vowing to block it.
Senate Majority Leader Richard L. Saslaw, D-Fairfax, said he is writing legislation to prohibit lenders from offering so-called open-ended loans with potentially unlimited fees.
Saslaw's bill -- and a similar measure by Del. G. Glenn Oder, R-Newport News, an industry foe -- would restrict lenders to payday loans, which a law that took effect Jan. 1 seeks to control through complex repayment rules and higher fees.
The perception that payday lenders are trying to elude a hard-fought clampdown fashioned last year is enflaming lawmakers in both parties. It threatens, as well, to hasten controls on car-title lenders, another industry seen as ensnaring the poor and uneducated in debt.
Should restrictions favored by Saslaw and Oder become law, lenders are not ruling out the possibility that they would dump their licenses to offer payday loans to focus, instead, on the pricier open-ended loans.
"That's a question we certainly can't answer right now," said Jamie Fulmer, spokesman for Advance America, the nation's largest payday lender.
Saslaw, who has defended payday loans as a necessary option for the cash-strapped and has taken thousands of dollars in contributions from lenders, said they "severely damaged" their credibility by seemingly bypassing the new rules.
Another friend of the lenders, House Commerce and Labor Committee Chairman Terry G. Kilgore, R-Scott, said it was "bad politics" for the industry to begin offering the largely unregulated loans ahead of the new payday rules.
Open-ended loans -- available as an alternative to payday loans -- have been approved by the State Corporation Commission, for the operators of 617 fast-money stores, roughly three-quarters of Virginia's total.
Payday loans are limited to $500 and typically repaid within two weeks. Open-ended loans -- essentially a line of credit -- are restricted to $750, but can carry higher fees and longer repayment schedules.
Saslaw said he vented his anger over the industry's latest maneuver in a meeting with the lenders' lead lobbyist, Reginald N. Jones, and Carol A. Stewart, vice president for government relations of Advance America.
Jones and did not return a telephone call or e-mail yesterday soliciting comment. Stewart declined comment.
Last week, in a letter to legislators, Jones defended the latest loan product as an alternative for those with "imperfect credit histories."
Contact Jeff E. Schapiro at (804) 649-6814 or jschapiro@timesdispatch.com.
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