Predatory Lenders in Chesterfield County

Here is a copy of an email distributed by the Virginia Interfaith Center for Public Policy.

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Speak Up and Help Keep Predatory Lenders in check in Chesterfield County!

Many of you have seen the story about the hearing on Chesterfield’s proposed zoning ordinance up for public hearing this week. On Wednesday our county leaders will be considering whether to impose some of the most strict local ordinance measures on predatory lenders or leave them take advantage of the most vulnerable, bring down property values, and encourage crime in the process. Please help put in place strict measures on predatory lenders at this critical local level!

All eyes are on Chesterfield as other localities wish to put in place similar restrictions, but want to know that the public is behind them. Show your support for these restrictions  by coming out at 6:30pm on Wednesday January 9th to tell the Board of Supervisors that these restrictions are not only necessary, but that you expect them to put them in place because this is everything in their power to restrict predatory businesses that push families into bankruptcy and foreclosure, leaving neighborhoods less safe and without substantial business investment.

What: Public Hearing on the Proposed Regulation to Alternative Financial Institutions

When: Wednesday January 9th at 6:30PM. This policy is the only item on the public hearing agenda, so we need as many folks as possible to speak! I will be there with fact sheets at 6PM and will be happy to answer additional questions as you prepare to speak.

Where: Public Meeting Room, 10001 Iron Bridge Road, Chesterfield, VA 23832
If you can’t come out, please consider emailing or calling your board of supervisor member before the public hearing. Click here  to see who your supervisor is; and then click here  to find their contact information. Ask your Supervisor to vote YES on the proposal related to Alternative Financial Institutions.
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As are all my posts to my blog, I alone am responsible for the content of this one. It should clear to the most casual reader that I speak for myself in these posts, not for anyone else, not for any organization or entity whether I'm a member of that organization or not.

"Alternative" Financial Institutions

"Alternative Financial Institution" is an unfortunate choice of terms because in some contexts it means useful organizations such as Community Development Financial Institutions.  In the context of this post, however, the term is better viewed as a synonym for vulture. In an editorial on July 17^th, the Virginian-Pilot said this:  “If predatory lenders had a trade publication – say, “Usury Today” – they’d undoubtedly rank Virginia near the top in annual roundups of the best places in the nation to do business.”

These institutions (vultures, predatory lenders, or whatever other pejorative you wish to use) include pay day lenders and short-term car title lenders both of which, in my opinion, exist to take advantage of people who are down and out. In Virginia, a car title lender is restricted, if you can call it a restriction, to charging not more than 22% per MONTH. That’s right, these people (for want of a better family rated term) can charge 22% per month.  The law, in its infinite mercy (recognize the sarcasm?), does not allow compounding so 22% per month is  264% per year. Virginia law allows that highest rate on the first $700 borrowed. Interest on the next $700 is “only” 18% per month. Above $1,400, a real bargain rate kicks in, 15% per month.  Another crumb offered by the law -- up front fees are limited actual costs of  recording a lien on the motor vehicle.

Tuesday afternoon (July 17) the Chesterfield County Planning Commission, of which I am a member, heard a staff presentation of a proposed ordinance to regulate where in the county alternative financial institutions might be located along with other restrictions.  In a private conversation with me, one attorney noted the proposal would allow these operations in only 3 locations in the county. My unspoken thought was, “that many?” I let staff, including the assistant county attorney assigned to advise the Planning Commission, know that I want an ordinance as restrictive as possible, given limits placed on the county by state law and judicial precedence.  I clearly expressed my opinion of these operations during the work session when I said, “They take people who are in a hole (and) instead of handing them a ladder, they hand them a shovel.” The Richmond Times-Dispatch has as article today reporting on this part of the Commission’s meeting.

For more information, see this earlier Pilot Online article headlined, “New data shows car title loans big business in Va.”

The above article reports that repossession rates are about 6.5% of loans made resulted in repossession of the motor vehicle (8,378 repos out of 128,500 loans). However, the article also reports 105,542 different individuals took out those 128,500 loans making the repo rate per individual borrower be over 7.9%. Repossession rates on auto loans financed by traditional means (banks, credit unions, new car dealers) don't seem to be readily available although using rough numbers and reasonable assumptions, that rate appears to be not more than the 3% to 4% range.

As always, comments are welcome. 

Edited on July 24 to provide a working link to the news article, “New data shows car title loans big business in Va.”