Senators who protected the high-cost instant-loan industry now are smacking it around.
Voting 9-1 yesterday, the Senate Commerce and Labor Committee backed Senate Bill 1470, which would block a perceived end-run by payday lenders on restrictions that took effect only 26 days ago.
"They've broken faith with what we did," said Sen. Phillip P. Puckett, D-Russell, referring to the 2008 battle over rules less onerous than those demanded by industry opponents. "And I'm one of the guys who stood with them."
With the approval of the State Corporation Commission, hundreds of money stores across Virginia now are offering open-ended loans. Their amounts and interest rates exceed those for payday loans.
Under a clampdown fashioned last year, payday loans -- while still limited to $500 -- are repaid through complex rules with pricier rates. The open-ended loans start at $750 and carry potentially unlimited interest.
Carol Stewart, a lobbyist for Advance America, the nation's largest publicly traded lender, told senators "it was never [the industry's] intent to circumvent" the new restrictions. She said most of the company's customers appear to favor payday loans.
In contrast with last year's struggle, when lenders jammed the General Assembly Building with hundreds of customers and employees, the industry's many lobbyists and public-relations advisers sat or stood quietly during the committee session, appearing somewhat chastened.
The bill headed to the Virginia Senate was written by Senate Majority Leader Richard L. Saslaw, D-Fairfax.
A longtime ally of payday lenders, Saslaw was furious over their apparent maneuver around rules that last year he said should not be too strict, lest they deny cash to the financially strapped.
Saslaw's legislation would prohibit payday lenders from offering both their signature loans and open-ended loans. Several senators told Saslaw that if his bill becomes law, lenders will drop their payday-loan licenses to concentrate on more lucrative open-ended loans.
Saslaw warned the industry to refrain from doing so. He suggested the legislature could clamp down, too, on the law that allows open-ended credit, a provision that frees car-title lenders -- another financing industry hoping to fend off restrictions this year -- to operate in Virginia.
"They could do that, but we meet every year," Saslaw said. "I would not advise them to do that."
Contact Jeff E. Schapiro at (804) 6496814 or jschapiro@timesdispatch.com.
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