Payday Lending Provisions Discussed

Tuesday, Aug 05, 2008

The extent of education that borrowers should have on the protections contained in a new law was discussed today during a hearing by the State Corporation Commission.

The regulations, which go into effect Jan. 1, are intended to implement a new payday loan regulation law passed by Virginia's General Assembly this year.

The new law restricts borrowers to one outstanding payday loan at a time and prohibits a person from taking out a second payday loan on the same day they have paid off a previous loan, among other provisions.

The law also requires the state commission to contract with a third-party vendor to create an Internet database of payday loans that can be used to enforce the loan limits.

Representatives of payday lenders and opponents of payday lending disagreed yesterday on how much information lenders should be required to orally provide borrowers about their borrowing options.

The state's tighter payday-lending law takes effect Jan. 1. Its provisions include:

• A prohibition on lending to borrowers who already have one unpaid payday loan;
• An opportunity once yearly for borrowers to use an extended-payment plan to repay a payday loan; and
• A 45-day cooling-off period for borrowers who take out five payday loans within a 180-day period or an opportunity for those borrowers to use an extended-term loan followed by a longer cooling-off period.

Source:: inrich.com