What The Payday Lenders Spent
Killing Regulations Cost A Lot
Wednesday, 30July, 2008
Any reader of this page knows that “payday lending” is alive and well in the Valley, especially given the often bright appearance of the facilities housing such services. Nine such lenders are here locally, while nearly 800 are sprinkled across the Commonwealth.
These payday lenders, a recent report in the Richmond Times-Dispatch revealed, spent millions of dollars during the last year to fend off plans to tightly regulate their business. From May 1, 2007 to April 30, 2008, payday lenders spent an estimated $3.8 million lobbying the Virginia General Assembly, part of a record $20 million of combined spending by lobbyists (which easily surpassed the previous record of $16 million).
A large portion of the lenders’ resources were geared to advertising and grassroots efforts. According to the report, one industry group, The Community Financial Services Association of America, spent $1.9 million on advertising. A second group, Virginians for Financial Choices, invested some $928,000 on grassroots efforts. The remaining amount (slightly less than $1 million) went directly to compensate lobbyists.
So what did all this big money buy? Payday lenders dodged a legislative bullet that would have limited the interest rates they can charge. As of Jan 1, the number of loans to any one borrower will be restricted.
Just to put the size of the industry in perspective, some $3.8 million was invested to protect the interest rate that can be charged on loans that average in the several hundred dollar range. But, some $1.3 billion in payday loans were made in 2006, double the amount in 2003, according to the State Corporation Commission. A typical loan is $500, to be paid back at $575 next payday. This equates to an annual interest rate of more than 390 percent.
Given some of the figures above, the $3.8 million lobbying bill doesn’t seem quite as large. And, this industry will likely face continued scrutiny and calls for tighter regulation in future General Assembly sessions. And higher lobbying bills, too.
Source : http://www.dailynews-record.com
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