Delegate favors abolishing practice of payday lending

By Ben Orcutt - borcutt@nvdaily.com

FRONT ROYAL -- While acknowledging that the Town Council is encouraging lowering the interest rates payday lenders charge, Del. Clifford L. "Clay" Athey Jr. says that he's not in favor of a resolution the panel endorsed on Monday.

The panel unanimously approved the resolution recommending that the General Assembly cap the annual interest rate and fees that payday lenders charge to consumers at 36 percent.

"I'd vote against 36 percent because, to be frank with you, I don't think we ought to have payday lending anyway," Athey, R-Front Royal, said Tuesday. "What I supported was the original bill that would have abolished payday lending in the commonwealth of Virginia. I think it was a mistake to ever do it. I voted against the original bill probably about eight years ago because I didn't think it was a good idea. As far as I'm concerned, it's usury. What we've done in my opinion is we've set up a system whereby people get further and further into debt on credit cards and all these things so that all of these new types of instruments can be made to loan people money that really can't afford to pay it back anyway, and it just gets them further into it.

"But for me, I just don't think 36 percent goes far enough. I don't think people ought to be charging people those kinds of huge interest rates and I think that's part of the problem we've seen in our country over the last few years."

Ryan Harris, a spokesman for Cleveland, Tenn.-based Check Into Cash, which has a branch in Front Royal, said that his company does not offer payday lending in Virginia, but added that putting a 36 percent cap on short-term loans is unrealistic.

"[On an] annualized percentage basis, there's just no way that anybody can offer the small, short-term loan on 36 [percent] interest," Harris said. "That's pretty much the long and short of it. That 36 percent, that's just a truly unfair way to gauge a small-term loan."

"I mean the question becomes, at what interest rate is it OK?" Athey said. "I guess there is an interest rate that I could support. I'm just not sure that 36 percent is [low] enough. Now they'll tell you that they can't make money at 36 percent. They were telling us last year that they couldn't make money at 105 percent. So I don't buy all that. It is what it is. To my way of thinking, it's the closest thing to legalized loan-sharking that I've ever seen.

"Sometimes what we allow the private sector to do can either make it worse for your citizens or better for your citizens, and I think on some levels if you can't get a loan at 15 percent or 20 percent and you need to borrow money and pay that kind of exorbitant kind of rate, prior to 2002 you would have to go to a private person to try to do something like that, and I'm not so sure we should have a business doing that."