Payday loans are a threat to Virginia business

Payday lending is growing in Virginia and the threat to responsible Virginia businesses grows as well. Last year Virginians paid over $124million in fees to payday lenders. The average borrower paid $612 in “fees” to borrow $340 for 6 months.

Where is all that money going? Instead of getting invested in the local economy, most of it is being sucked out. Most of it goes back into the pockets of the lenders and more than 50% of the payday loan branches are owned by out-of-state businesses. Borrowers are not using the money to buy goods and services in the community because the borrower is paying back far more than he borrows.

Payday lenders are willing to lend to virtually anyone with a checking account and some kind of regular income. This "open door" policy is described by the industry as "serving people who have been denied access to credit by traditional lenders." But payday lenders are actually providing access to debt, not credit. According to a survey of borrowers done by the payday lending industry, only 6% choose these loans because there is no other alternative.

Unlike responsible lenders, the payday lender doesn’t check whether a borrower will be able to pay his other debts and other obligations. Why? Because payday lenders take a prospective bad check as collateral for the loan and the lender knows that the borrower must repay the payday loan before he pays anyone else or he risks financial chaos when that check is presented to his bank for payment.

Payday loans are a debt trap for borrowers. Because the loan is due in full on the borrower’s next payday, the borrower is forced to continue borrowing from the same or different payday lenders to make sure his checks don’t bounce. Many borrowers are also afraid they will be prosecuted for writing a bad check even though Virginia law prohibits this. This is why the average Virginia borrower got more than 12 payday loans last year.

Why is this threat to other Virginia businesses? Instead of providing responsible credit to borrowers that they can use in the local economy, payday lenders are sucking $124 million in “fees” out of the local economy. Once the borrower gets trapped into multiple loans, he may default on his obligations to other creditors because the payday lender must be paid first. Responsible businesses will not be paid timely and many will not be paid at all if the borrower is pushed into bankruptcy.

Center Priorities (.pdf)

Bulletin Inserts
Child Support (.pdf)
Environment (.pdf)
Housing Trust (.pdf)
Indigent Defense (.pdf)
Payday Lending (.pdf)
Minimum Wage (.pdf)

Advocacy Resources
Advocacy Guide (.doc)
Advocacy Portal (link)
Lending Info. (.ppt)
Richmond Map (.pdf)

For Small Groups
Eco-Stewardship (link)
Prayers for Creation (link)
Poverty Diet (link)

Policy Briefs
EITC (.doc)
TANF Child Support (.doc)
Payday Loans (.doc)
Healing Creation (.doc)
Child Ombudsman (.doc)
Affordable Housing (.doc)
Indigent Defense (.doc)
Minimum Wage (.doc)
Wage & EITC (.doc)
VA Tribes (.link)

Actions
Lending Petition (link)
Title Petition (link)
Wage Petition (link)

Reports
Budget Analysis (.pdf)
Food Stamps (.doc)
Lottery Study (link)

FAQ's (link)

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