RICHMOND, Va. -- In these turbulent financial days, many Americans are reeling from the fallout of the pandemic.
Lost jobs for some and for others, hours have been drastically cut. Making ends meet, some may turn to payday lending businesses.
Now Virginia lawmakers are protecting consumers under the new Fairness in Lending Act. Dana Wiggins of the VA Poverty Law Center says they’ve been working on predatory lending reform for two decades.
“Close all the loopholes so everybody is regulated and we have significantly limited the costs that could be charged to the customer both in terms of interest rates and fees” Wiggins said.
She’s talking about payday, car title loan, line of credit and internet payday loan companies.
Some previously were allowed to charge 200 and 300 percent interest.
“ To borrow $1,000, you were paying $4,000 back to the lender. For many people, that’s a lot. It’s a lot to bear, particularly for those who are financially vulnerable and struggling, working to make ends meet” Wiggins added.
The current reform now makes loans affordable by limiting payments to five percent of each paycheck, unless lenders give customers at least four months to repay.
It also curbs unaffordable balloon payments and abusive lines of credit. For example, a credit card with 299 percent interest and other fees that create long term problems.
“A lot of times the loans took over everything. They would owe on one loan and then borrow another loan to pay on the first one because it was getting to be unaffordable. Then it became a snowball effect” Wiggins said.
Changes that are aimed at leveling the playing field.
“We wanted people to have the ability to access credit that they needed, when they need it. We also didn’t want it to be so predatory with lots of undue practices and excessive costs. We wanted it to be a fairer system for everybody” Wiggins explained.
The consumer protections under the new Fairness in Lending Act kicked in on January 1. Anyone with issues or concerns are encouraged to call the Virginia Poverty Law Center’s Predatory Lending Helpline at 866-830-4501.
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