Payday Loans in Virginia: Subprime Report
In 2015, Virginia’s poverty rate dropped slightly to 11.2%, which is the 11th lowest in the nation.1 During this time, the median household income in Virginia reached $66,262—that’s $10,487 higher than the nationwide average.2 Despite such a high median household income and an unemployment rate of 4.8%, Virginia residents are still searching for alternative means for making ends meet.3 As a result, many people might turn to predatory bad credit loans such as payday loans or title loans in Virginia—an option that should be avoided.
Payday Loans in Virginia
Payday loans in Virginia are governed by a set of laws that place restrictions and limits on who can conduct business as a payday lender, what they have to do to obtain a license, and what happens if the lender doesn’t meet the necessary payday lending requirements in Virginia.5 Even after a payday lender obtains the necessary lending license in Virginia, they must follow laws on how to operate, as well as limited in the terms and conditions they can include in their loans to consumers.5
The History of Payday Loans in Virginia
In 2009, Virginia passed HB 12 – Payday Lending Restrictions to crack down on payday loans that included APR caps and loan limits. These crackdowns took place because Virginia Legislation wanted to prevent the piling up of debt.6
Prior to the regulations of 2009, many lenders were offering payday loans in Virginia.6 After this “crackdown,” Virginia regulations restricted the annual interest rate that payday lenders could charge no more than 36 percent plus a 20 percent fee of the amount borrowed.6
In 2012, there were 470,062 payday loans taken out in Virginia, totaling $185,679,381 with an average loan of $395.8
As a result of HB 12, the Payday Loan Act, Virginia payday lenders also switched to offering title loans—giving Virginia lenders another option for trapping borrowers in an endless cycle of debt.6 The offering of title loans enabled lenders to charge whatever they wanted, so long as the lenders provided consumers with a grace period and didn’t charge any interest during the first 25 days of the loan or line of credit.6
Virginia Payday Loan Rules and Regulations
According to Virginia law, payday lenders are required to obtain a license from the State Corporation Commission—even if the lender doesn’t have a physical location in the state of Virginia.9 As a condition of obtaining and maintaining a license, a payday lender in Virginia must have a bond to operate.9
- Maximum Loan Amount:$500
- Minimum Length of Loan:2 pay periods
- Rollovers Permitted:None—cannot refinance, renew, or extend
- Fees and Finance Charges:36% annual interest, a $5 verification fee, and 20% of the loan amount
- Finance Charge on a 14-Day $100 Loan:$26.38
- APR on a 14-Day $100 Loan:687.76%
- Maximum Number of Outstanding Loans at a Time:The maximum dollar amount allowed at one time is $500
- Repayment Plan:Yes – Four equal monthly installments
- Cooling Off Period:Mandatory 45-day cooling-off period after the fifth payday loan in six months, which is enforceable through a database.7
On average, a loan of $100 given for a period of two weeks, can lead to an APR of 687.76%.7
Virginia consumers can also apply for payday loans through the internet. However, any company that provides payday loans to Virginia consumers is also required to get a license from the Virginia State Corporation Commission.9 If the online lender wants to offer payday loans to residents of Virginia, they need to be licensed to do so in the state.9
Virginia Payday Loans
687.76% APR on Virginia Payday Loans10
743 Virginia Payday Lenders10
Alabama Payday Loans
456.25% APR on Alabama Payday Loans10
1,177 Alabama Payday Lenders10
Final Notes on Payday Loans in Virginia
Virginia legislation worked to protect consumers from the misleading ways of payday loans by enforcing a cap on interest and the length of the loans. However, payday lenders in Virginia soon found a way around these regulations by offering open-end credit loans or title loans. These loopholes allow lenders to charge triple-digit interest rates once again.
Title Loans in Virginia
Though payday loans have been addressed with regulation in Virginia, car title loans have not.11 While neighbors North Carolina, West Virginia, Kentucky and Maryland do not allow title loans, Virginia does. And car title loan lenders there charge 350—360 percent.11
Virginia title loan fees totaled $252 million, while payday loan fees totaled $18.7 million.12
The History of Title Loans in Virginia
In 2013, there were 378 title loan companies in Virginia, with an average of 340 loans per store. At an average of $976 per loan and a total of 128,446 loans taken out in a single year, title lenders in Virginia are taking a lot of money away from those who need it the most.14
Virginia Title Loans
378 Virginia Title Loan Stores (as of 2013)13
16,362 state residents per Virginia Title Loan store13
Alabama Title Loans
672 Alabama Title Loan Stores (as of 2013)13
5,427 Alabama state residents per Alabama Title Loan store13
Virginia state law § 6.2-2200 places restrictions and limits on who can conduct business as a title lender in the state. Even if a title lender in Virginia is properly licensed, they must follow laws on how they operate and what terms and conditions they can include in their loans.14
Virginia Title Loan Restrictions
While title loans in Virginia—like elsewhere—are extremely dangerous. There are rules: a title lender in Virginia can’t give you a loan totaling more than 50 percent of the fair market value of your vehicle. The loan term also can’t be shorter than 120 days, but it can’t be longer than 12 months either.15
While these limitations are a benefit for the consumer, they still adds up. Typical title loans require that the principal plus interest must be paid within 30 days, but Virginia extends the terms to help consumers better afford repayment.15 In Virginia, the interest rate is capped at 22 percent per month for loans up to $700, which can still cost you.15
If a title loan in Virginia is between $701 and $1,400, the interest rate is capped at 18 percent per month.15 For a loan that is higher than $1,400, the interest rate will be capped at 15 percent per month.15 If you can’t pay your title loan off by the end of the loan’s terms, it cannot be rolled over, extended, or renewed. At the end of the term, if your loan is not paid, you will simply lose your vehicle to the lender.15
If you have a $700 title loan in Virginia, it will cost you a total of $1,316 at the end of the minimum four-month period, or $2,548 at the end of a maximum one-year term.15
Final Notes on Title Loans in Virginia
Title loans are designed to trap a borrower in a cycle of debt just like payday loans. The maximum amount for title loans in Virginia is limited to the value of the car, which means borrowers can be sucked into a cycle of debt that could end with the repossession of the car. At the end of four months, a title loan of $700 will total $1,316.15 Even worse, if you don’t have the money at that time, you can kiss your vehicle goodbye.
Regulating Payday and Title Lenders in Virginia
You might sometimes come up short on your monthly finances, but that doesn’t mean you should just “deal” with it. There are alternative options available to help you get through that “rough patch”. However, it is important to do your research before committing to anything.
Look for other alternatives for helping with money. If you do choose to go the payday loan or title loan route, only accept from a lender that acts in accordance with the laws of Virginia.
How to Report a Lender in Virginia
If you want to find out if a payday or title lender in Virginia is properly licensed and bonded, you can contact the Bureau of Financial Institutions—a division of the State Corporation Commission. You can visit their website, or call their toll-free number at 1-800-552-7945.
By visiting the website for the Bureau of Financial Institutions, you will find a list of names and addresses of lenders who are currently licensed. You can also find a variety of information about your rights as a borrower, and how to file a complaint about a Virginia payday or title lender.
- Address:Tyler Building, 8th Floor 1300 East Main Street, Suite 800 Richmond, VA 23219
- Phone:(800) 552-7945
- Fax:(804) 371-9416
Outside Help for Payday and Title Loans in Virginia
The Virginia Bureau of Financial Institutions is available to handle your complaints, but there are outside resources to provide you with further guidance. One group is the Virginia Legal Society. Virginia Poverty Law Center (VPLC) is also available to provide you with further guidance on what to do if you have a title loan or payday loan in Virginia. VLAS is a nonprofit law firm established in 1977 to provide free civil legal services to eligible low-income residents in Virginia. If you need help, VLAS might be able to work with you.
Virginia Poverty Law Center (VPLC) is also available to provide you with further guidance on what to do if you have a title loan or payday loan in Virginia. Established in 1978, VPLC is committed to leading and coordinating efforts to seek justice in civil legal matters for lower-income Virginians. This means, if you’ve taken out a title loan or payday loan in Virginia, you have a dedicated team of individuals available to help.
Consumer Protection in Virginia
To help Virginia continue their battle against predatory lending and to better protect its residents from the vicious cycle of debt, reach out. By understanding warning signs, the laws, and where to report a lender or seek outside help against payday and title loans in Virginia, you can help get the ball rolling for better legislations. Change won’t happen overnight, but it’s a fight worth fighting in Virginia.
This page is available to help you better understand loans and payday loans in Virginia—it’s got all the information you need, and then some.
Guides to Payday and Title Loans in Virginia Cities
You know payday and title loans in Virginia are a problem. But what about at the city level?
Check out these payday and title loan guides for the following cities in Virginia…
- “Poverty” Virginia Performs. Accessed March 30, 2017. http://vaperforms.virginia.gov/indicators/economy/poverty.php
- “Virginia Household Income” Department of Numbers. Accessed March 30, 2017. http://www.deptofnumbers.com/income/virginia/
- “Virginia” Bureau of Labor Statistics. Accessed March 30, 2017. https://www.bls.gov/eag/eag.va.htm
- “State Debt” Ballotpedia. Accessed February 13, 2017. https://ballotpedia.org/State_debt
- “Payday Lending State Statutes” National Conference of State Legislatures. Accessed 6, 2017. http://www.ncsl.org/research/financial-services-and-commerce/payday-lending-state-statutes.aspx
- “Virginia: Payday Lenders Skirted Regulation by Offering Open-Ended Credit Lines” Payday Lending Facts. Accessed March 6, 2017. http://paydaylendingfacts.org/2016/07/25/virginia-payday-lenders-skirted-regulation-offering-open-ended-credit-lines/
- “Alabama State Information” Payday Loan Consumer Information. Accessed March 6, 2017. http://www.paydayloaninfo.org/state-information/8
- “Payday Lending Abuses and Predatory Practices” Center for Responsible Lending. Accessed March 30, 2017. http://www.responsiblelending.org/state-of-lending/reports/10-Payday-Loans.pdf
- “Payday Loans” Virginia Legal Aid Society. Accessed March 30, 2017. http://www.valegalaid.org/files/E095B726-FCD8-81C1-17DC-A16C7ED73FFF/attachments/B15FA29B-AA5D-6288-4C47-D54C66C25B72/payday-loans.pdf
- “McDonald’s vs. Payday Lenders” California State University Northridge. Accessed March 6, 2017. http://www.csun.edu/~sg4002/research/mcdonalds_by_state.htm
- “Why Can’t Virginia Protect the Poor from Predatory Lenders?” Virginia Interfaith Center for Public Policy. Accessed February 15, 2017.
- “Payday and Car Title Lenders Drain $8 Billion in Fees Every Year” Center for Responsible Lending. Accessed February 15, 2017. http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf
- “Driven to Disaster: Car-Title Lending and Its Impact on Consumers” CFA. Accessed February 15, 2017. http://www.responsiblelending.org/other-consumer-loans/car-title-loans/research-analysis/CRL-Car-Title-Report-FINAL.pdf
- “Car-Title Lending” Center for Responsible Lending. Accessed February 13, 2017. https://www.tml.org/p/Center%20For%20Responsible%20Lending%20Car%20Title%20Loans%20Report.pdf
- Title Loans in Virginia: Everything You Need to Know” Drive-Safely.net. Accessed March 30, 2017. http://www.drive-safely.net/title-loans-in-virginia-everything-you-need-to-know/