Whistleblower group urges Virginia payday lending reform

Associated Press
Published: February 19, 2008

RICHMOND, Va. (AP) - A former manager of a payday lending store on Tuesday urged legislators to pass aggressive industry reforms to stop what he called “financial terrorists” from preying on vulnerable Virginians.
Cameron Blakely, who last year managed a Washington, D.C, Check ‘n Go, supported a House of Delegates bill that would limit the number of loans borrowers could have to one at a time and five annually, monitored by a database. It also would extend the loan to two pay cycles.
He condemned the Senate’s proposal, which would allow borrowers to enter into extended payment plans, but bar them from getting another loan for three months afterward. Payday lending opponents have said that will discourage borrowers from taking advantage of the extended payment option.
The House and Senate are expected to take up each other’s legislation by the end of next week, giving them another week to work out differences before the session’s scheduled March 8 adjournment.
Both sides have said they favor reforms that would protect those who take out one loan to repay another, spiraling deeper into debt, while keeping payday loans an option for those who use them responsibly.
Blakely said he was trained to encourage people to take out the maximum $500 payday loan as a way to keep them coming back for more money.
“I realized I was working for financial terrorists, bent on financially enslaving as many hardworking Americans as they possibly could,” Blakely said at a news conference. He appeared with John LaCombe, founder of CapAmerica, a group of former payday loan borrowers and whistleblowers.
Check ‘n Go attorney Yancy Deering disputed Blakely’s accusations, saying the company does not lend the maximum amount to those it doesn’t think will be able to repay the loan. He would not provide the average loan amount, saying only that it was “considerably less.”
“We want the product to work, and for it to work people must be able to pay it back on the date that the loan becomes mature,” Deering said.
Currently, payday lenders charge $15 for every $100 loaned, pushing annual interest close to 400 percent for a typical two-week loan.
Payday lending opponents have said the only way to protect those who are drowning in debt is to either cap the annual interest rate at 36 percent or limit the number of loans borrowers can have each year.
Both the House and Senate included 36 percent interest caps in their bills, but each allowed payday lenders to charge additional fees similar to those already in place.
Several neighboring states do not allow payday loans, while Washington, D.C., recently capped the interest rate at 24 percent.
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