Commonwealth of Virginia
Office of the Attorney General
900 East Main Street
Contact: Emily Bolton
ATTORNEY GENERAL HERRING LAUNCHING EFFORT TO COMBAT PREDATORY LENDING
~ By May 1, OAG will develop a plan to revitalize its consumer protection efforts, including a focus on predatory lending ~
RICHMOND(March 26, 2015) - During a field hearing of the federal Consumer Financial Protection Bureau in Richmond, Attorney General Mark R. Herring today announced that his office will be developing strategies to combat predatory lending that ensnares thousands of Virginians each year in a cycle of debt. The effort coincides with the CFPB's announcement at the hearing that it will begin a federal regulatory process to establish a national baseline of regulations on payday lenders.
"In the months ahead, I'm going to reorganize and re-energize my consumer protection section to include a focus on predatory lending," said Attorney General Herring. "Back when I was in the Senate, I worked to crack down on predatory payday lending and enact some reasonable regulations, but almost immediately we saw exploitative tactics shift over to car title lending and then to open-ended loans. Too many Virginians are finding themselves turning to these products in a moment of need, starting a cycle of loans and debt from which they can't escape. Some of these loans are little more than financial quicksand, designed to fail from the second they're made. Virginians deserve better, and I'm going to use the resources and authority of my office to make sure they get it."
In recent years, Virginia has earned an unfortunate reputation as the "East Coast capital of predatory lending." According to the State Corporation Commission, in recent years, Virginia-based payday lenders have annually made more than 440,000 loans totaling more than $170 million to more than 137,000 borrowers. The borrowers take out an average of more than three loans a year to stay afloat at an average annual interest rate of 289%. Virginia-based car title lenders also issued more than $206 million in loans in 2013, up from $180 million in 2012, to more than 150,000 borrowers, with an average APR of 216%. More than 17,000 borrowers had their car repossessed and more than 13,000 had their car sold.
Complaints to the Office of Attorney General in recent years have included Virginians who owed $63,000 after borrowing $10,000, $14,000 after borrowing $2,500, and $5,000 after borrowing $1,000. Private lawsuits in Virginia have included cases like that of a couple from Mechanicsville who have been stuck in an open-end loan for four years. They borrowed $2,100 from a Virginia payday lender, have paid over $15,000 in principal and interest over the four years, and the lender still claims they owe $2,100.
To help address predatory lending in Virginia, Deputy Attorney General for Civil Litigation Rhodes Ritenour, will deliver a plan to Attorney General Herring by May 1 for reorganizing and revitalizing the Attorney General's Consumer Protection Section to include a focus on predatory lending. Potential strategies for combating predatory lending will be developed in the coming weeks, and may include:
- Enforcement Actions, using the expertise and resources of the office to crack down on lenders violating existing laws.
- Consumer Education, by providing assistance to create financial literacy courses and credit mentoring guidelines to be offered by community organizations.
- Partnerships with the CFPB, other states, advocacy groups, and other stakeholders to multiply the power of OAG resources, take action against bad actors operating across state lines, and stay up to date on consumers' experiences.
- New State Legislation, based on what's working in other states, what enforcement tools the OAG and others might need, and to help close loopholes lenders have found since the last legislative efforts.
- Alternative Lending Solutions, exploring ways to help consumers access affordable, non-predatory low-dollar loans, and reduce the number of unbanked households and others who can't borrow-or can't borrow enough- through traditional banks.
The Attorney General is the voice of consumers in Virginia on regulatory matters like utility rates and fights for consumers who have been the victim of abusive or exploitative business practices in matters both large and small. In the past year, the office has worked to enforce consumer protection laws against mortgage lenders, retailers, big banks that defrauded Virginians, and in individual cases where consumers' rights were violated. Just a few months ago, the Attorney General partnered with the CFPB to end egregious debt collection practices by a group called Freedom Furniture and Electronics that was targeting veterans, military servicemembers, and their families.
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