With the rise of online lenders, consumers in Virginia can be hit with loans that have interest rates far beyond any brick-and-mortar location. Now one lawmaker from Northern Virginia is offering a solution, although consumer advocates say the bill might cause more problems than it solves.
Delegate Mark Levine of Alexandria says businesses that offer online loans in Virginia should have a license. He’d also like to hit them with an interest rate cap and other consumer protections. But he’s willing to start with just a license.
“I want to get them in the door. I want to know who they are. We don’t even know who these people are. Find out who they are and what they’re doing. And yeah, I do want to regulate them. But first let’s get them in the room."
Jay Speer at the Virginia Poverty Law Center says that might create more problems than it solves. If state regulators offer a license to give loans that has no restriction on the interest rate and no protection for consumers, high-interest lenders will flock to the new thing and cash in.
“They will all switch to that type of loan and get a license. Then there’ll be no interest rate cap and there’ll no prohibited practices, no restrictions on what they do. So why wouldn’t all the payday, car-title and internet lenders all switch to that?”
Levine says he’s worried about what might happen if online lenders are not required to get a license, and they’re allowed to continue offering loans at five thousand percent. He’s hoping a work group that’s meeting this summer and fall might issue a recommendation for the next General Assembly to take action.