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Attorney to ask City Council for cheaper loan rate

As a legal aid attorney, Jeremy White has his share of clients with money problems. And lately he’s noticed a trend that disturbs him.

In a letter to City Council, the Lynchburg lawyer recounts the troubles of one man who came to them hoping to find a way out of debt. At the time, he had 15 outstanding payday loans - a total balance of more than $8,000.

“I would say this is a common example now (among payday customers),” said White, speaking on his own behalf, not for his employer. “I see it on the other end, when people come in with payday problems. … It’s really a cycle that’s hard for people to get out of.”

That’s why White plans to go before City Council tonight to urge it to call for tougher interest restrictions on the booming payday industry, which has fought such suggestions in the past on the grounds it would devastate their profits and force them out of business.

Currently, most small lenders in Virginia are held to a 36 percent annualized interest rate.

Payday lenders, who offer short-term loans generally lasting only two weeks, have been exempt from that mandate since 2002.

Instead, they charge a flat 15 percent fee or $15 for every $100 borrowed. On a two-week loan, that’s the equivalent of a 391 percent annualized interest rate.

“There’s just something inside me saying this isn’t right,” said White. “For years, we’ve had these interest limits in Virginia and now it’s like the sky’s the limit. And I see the low-income individuals who get trapped.”

Attempts to cap payday interest at the standard 36 percent have failed in the General Assembly as recently as last year.

In September, the City Council in Staunton passed a resolution calling on the state to ratify the measure. White will ask the Lynchburg City Council to approve the same message.

So far, a total of 51 counties, cities and towns of 321 total have signed onto the Staunton campaign.

Opponents of payday lending have said it’s a predatory industry that takes advantage of the state’s most financially vulnerable.

Industry representatives counter that it’s a valuable stopgap solution for those who use it wisely, and have been amenable to some reform suggestions.

“I think there’s just a lot of misunderstanding about the industry, largely put out by the industry critics, which is unfortunate,” said Jamie Fulmer, director of investor relations for the country’s biggest payday company, Advance America.

“This is a product consumers truly like because it helps them when they get caught between paychecks by an unexpected expense,” he said.

Should payday lenders have to comply with a 36 percent interest cap, their profit on a $100 loan would drop from $15 to $1.38.

That margin, Fulmer said, would “effectively” repeal the entire industry and force their customers to less desirable options.

Advance America has 142 lending posts in Virginia, two of which are in Lynchburg, according to the State Corporation Commission.