Information Alert: Payday Lenders Leaving Town

Victoria Cobb, President
Thursday, April 23, 2009

The Richmond Times Dispatch reported today that one of the largest payday lending groups, Check ‘n Go, is closing up shop and leaving Virginia. While we would normally frown on the loss of business in our Commonwealth, the predatory lending institutions like this bring no benefit to the citizens of Virginia, and we’re glad to see them go.

Last year we were proud to work along side a diverse coalition of organizations that sought to limit the interest rates that payday lenders can charge. The incredibly high interest rates they were getting away with charging were trapping Virginians into a cycle of debt and putting families at risk. Though we were unsuccessful in capping the rate, the General Assembly did approve several restrictions, like the number of loans an individual can have and remedies for those caught in the debt trap.

While not thrilled with the outcome, it was an incremental step in the right direction. This year the General Assembly further restricted these lenders after they sought to side-step last year’s law (The Family Foundation did not take a position on the issue this year.) Along with the declining economy where joblessness continues to increase, few people are spending beyond their means. Combined with the new restrictions, payday lenders are finding fewer victims.

I found one comment from a payday lender in today’s article revealing. W. Allen Jones, founder and chairman of Check Into Cash of Cleveland, Tenn. said “People will not overspend; they're not confident in their jobs.”

Note that, according to this quote, payday lenders were counting on people overspending. Payday lenders were created to take advantage of people’s irresponsibility or desperation. This is not a business model that the Commonwealth of Virginia should endorse.