Payday loans in Virginia
The south eastern state of Virginia is nicknamed the ‘Old Dominion’. This was the first English colony to be settled in the US and it is a beautiful region. The Blue Ridge Mountains and Chesapeake Bay are just two of the famous landmarks in this rich state.
Virginia’s economy is very diverse with agriculture being one of the oldest sectors. However, the modern economy also depends on federal agencies. Both the US Department of Defense and the CIA have headquarters located in Virginia and there is also a major port which creates many jobs in the military facilities that are housed there.
At first glance it would appear that the rich residents of Virginia would not need payday loans but this is not the case. There are plenty of economic sectors where wages are low or people work part time and these are the low income families who make use of payday loans.
Some historical facts about Virginia
Many people have played an important part in shaping the state of Virginia. This was a focal point for the French and Indian Wars as well as the Civil War and the American Revolution which freed the US from the dominion of the UK.
Europeans arrived in the 17th century and the demand for tobacco in Europe fueled extensive trade routes as well as tempting more Europeans to come and settle in the New World. After the Declaration of Independence and the subsequent conflict, Virginians were right at the heart of the lawmakers who wrote the US Constitution and the Bill of Rights. The state became part of the Union in 1792 and was the 15th state to join.
Twentieth century Virginia
The tobacco industry has always been important to Virginia and was centered on Richmond. Additionally, there have been mining, ship building and several other industries that helped to create the wealth of the state.
During World War 2, the Pentagon was constructed and at the heart of the Cold War, when defense was paramount in the minds of US citizens, the government expanded its national defense program and Langley became of even more importance.
The diverse economy in Virginia includes thousands of jobs in the government sector. The state is categorized as an ’employment at will state’ which means that employees have little or no rights to stay in their jobs and can be effectively fired at the will of the employer. However, it also means an employee can also leave without giving any notice.
Major employers in the state include Amazon and Wal-Mart but the one that employs the most workers is the US Department of Defense. At the Pentagon building there are over 23,000 employees and at Langley there are many more but for security reasons no figures are released.
The economy in Virginia
There are 4.1 million civilian employees in Virginia and a third of these work in the services sector. The state has a low unemployment rate which stands at just 3.6% and an average wage is $53,723. The strong economy also means that Virginia is highly ranked at 11th for the most wealthy states in the country.
The north of the state has residents who are earning the highest amount per capita than in any other part of the region. Major influences on these income figures are the high standards of education and the many opportunities for excellent jobs. Counties in Virginia feature amongst the top one hundred wealthiest in the US and a study in 2013 showed that the state had the seventh largest number of millionaires per capita.
The state of Virginia has a low unemployment rate which stands at just 3.6% and an average wage is $53,723.
With such excellent figures for wages and the economy, it is perhaps surprising that Virginia has any payday lenders at all. And, in fact, the regulations for payday loans in the state are very inflexible but do allow high rates of interest to be charged. Nevertheless, there are over 800 lender stores registered with licenses and an increasing amount of online lenders are trying to take part of the lucrative lending market share.
Payday lending regulations in Virginia
Virginia is one of the states that has imposed some of the most rigid regulations for payday lenders. Before 2009, payday loans had become very popular and lenders were averaging over 3.4 million loans per year. Major changes to the laws were introduced in that year and this led to a steep decline in lending. The high figure for 2008 of 3,378,047 dramatically dropped to 459,916 after the new rules took effect in 2009.
Main terms of payday loans in Virginia
The maximum amount of a payday loan must not exceed $500. Interest rates are capped at 36% for a simple annual rate and lenders can charge a verification fee of $5 plus a maximum amount equal to 20% of the principle amount of the loan. The $5 portion of the verification fee is charged in order that the loan can be placed on a central database which helps lenders to check whether there are any existing loans.
This calculation makes the total financing fees a sum of $26.38 for a $100 loan over 14 days. The annual percentage rate for this $100 loan works out at 687.76%. As most people only borrow for a short length of time, the high rate of interest is not as important as the total cost of the loan. This is the figure to check if you are considering borrowing through a payday loan.
Limits of debt
The term of a loan must not be longer than two paydays and a borrower may only have one outstanding loan at a time. So, if the customer gets paid every two weeks the term of the loan will be for 31 days and no longer. A borrower who get paid every month can take out a loan for a period of 60 days.
There is a one day cooling off period that applies when a loan is paid off. Therefore, you cannot take out another loan on the same day that you repay the original loan sum. And, there is an obligatory cooling off period of 45 days for any customer who has taken out 5 consecutive loans within a 180 day period.
Limits of collection fees
Lenders can charge a single fee of $25 for non sufficient funds and court costs including reasonable attorney fees can be charged up to $250. Borrowers can change their mind and cancel a loan with no charges if they inform the lender by close of business the next working day. This means that a a loan taken out on a Friday morning can be canceled without charge up until Monday at close of business.
A lender may offer an extended repayment plan if the customer has had 5 payday loans in the 180 day period and cannot make the full repayment on time. However, it is important to carefully check the conditions of any loan agreement before making a commitment to a payday loan.
Number of lenders in Virginia
Yellow Pages lists 856 payday lender businesses in Virginia. No business is allowed to operate without a license from the Virginia State Corporation Commission. Online lenders are not allowed to offer loans because the practice of online lending is banned within the state. There are lenders who do advertise loans within the state but these are illegal and there is no protection offered by the regulator is you use one of them for a loan.
Characteristics Of Borrowers In Virginia
In 2015 and 2016, 6.1% of the adult population in Virginia took out a payday loan. The average amount borrowed was $393. The highest percentage of borrowers earned less than $15,000 per year and 55% rented their home withe the rest being homeowners.
Of all the loans taken out, 45% were for fully employed people with 14% being part timers and 11% unemployed.
Legislation for payday loans
The regulator for payday loans in the state is the Virginia Bureau of Financial Institutions. The new laws put into place in 2009 were designed to stop residents from falling into a debt trap and they have largely been successful in spite of the fact that the maximum interest rate is so high. The limits that apply to the number of allowable loans has helped to prevent more people from getting trapped into a continuous cycle of borrowing.
All payday lenders must register every loan on a central database so that each borrower history can be recorded and tracked. No one can operate as a lender without a license issued by the Virginia State Corporation Commission and to do so is a felony offense. Only lenders with a physical presence in the state may apply for a license.
This means that online lenders are not permitted to offer loans and there are no legal online lenders in Virginia. Applications for licenses cost $500 which is non refundable. The lawmakers in Virginia are very clear that the regulations relating to payday loans will be very strictly enforced. However, there are some online lenders who continue to advertise loans to residents of the state. Any lender offering an online loan is not licensed and there is no protection for borrowers should they apply. The regulator can be contacted at the following addresses:
State Corporation Commission
1300 E Main St
P O Box 1197
If you are struggling to get by and do not want to take out a payday loan there are some other options available. In Virginia you can go to the Energy Assistance Program or the Supplemental Assistance Program and get help and advice. The scheme run by 2-1-1 Virginia is also on hand to advise you how to balance your daily budget. and can provide financial and transportation assistance.
Summary for payday loans in Virginia
Lenders in Virginia must adhere to the rules as outlined above regarding the maximum amount of a loan, the loan term and the limits for fees and charges. No lender may offer loans from a website only as all licensed lenders must be physically present in the state. The regulations for payday loans in Virginia are specific to the state and all other states have their own rules for lenders.