Virginia's payday lending legislation left a loophole that has rendered it essentially ineffective in protecting against the loan abuses it was touted to prohibit. Predatory lenders in Virginia have started taking advantage of this loophole to subvert the new payday loan restrictions that took effect the first of the year. The loophole allows lenders in Virginia to make unrestricted and unregulated open-end loans, using a section of the code that was originally designed for credit card companies. Under Senate legislation introduced by Senator Mark Herring (D-33rd), Virginia would tighten controls on payday lenders who are getting around the new regulations by limiting interest on these open-end loans to no more than 36 percent.
New state regulations governing payday lending institutions took effect today. Anyone who has spent significant time in the Southside will recognize the importance of this legislation for our area. Martinsville and Henry County are riddled with them--driving through Collinsville, one can count at least 12 pay day lenders just in a 2-mile stretch of this blog's namesake.