Just Just How Virginia’s Fairness in Lending Act Reforms loans that are small-Dollar

After several years of legislative efforts to foster a safe and viable marketplace for tiny loans, Virginia lawmakers in 2020 passed bipartisan legislation—the Fairness in Lending Act (S.B. 421/H.B. 789)—to prohibit loans with large last re payments, called balloon re re payments, and reduce costs. The legislation rationalizes exactly exactly exactly what was indeed a disparate regulatory framework, governed by a patchwork of laws and regulations that permitted payday and automobile name loans with unaffordable re re payments and needlessly high expenses, and uncovered borrowers to economic damage, including repeated borrowing and high prices of car repossession. Past research by The Pew Charitable Trusts revealed that prior to the reforms, companies routinely charged Virginians 3 x a lot more than clients in lower-cost states. 1

Virginia lawmakers balanced concerns in regards to the option of small-dollar credit aided by the urgency of stopping harmful financing techniques, a challenge that officials various other states also provide struggled with. Virginia’s evidence-based approach builds on successful reforms formerly enacted in Colorado and Ohio that maintained widespread use of credit and measurably enhanced customer outcomes by shutting loopholes, modernizing outdated statutes, and prohibiting balloon re payments. Legislators designed the work to mirror “three key principles of accountable financing: affordable re re payments, reasonable rates, and time that is reasonable repay.” 2

Pew’s analysis of this work confirmed that, beneath the legislation, loan providers can profitably provide affordable installment loans with structural safeguards, saving the standard debtor a huge selection of bucks in charges and interest with estimated total consumer savings exceeding $100 million yearly. (See Dining Dining Table 1.) This brief examines exactly how Virginia reformed its guidelines to achieve a far more contemporary, vibrant, and consumer-friendly small-loan market. Continue reading Just Just How Virginia’s Fairness in Lending Act Reforms loans that are small-Dollar