RICHMOND — Virginia legal advocates are on the lookout for attempts to subvert the state’s Fairness in Lending Act.
The 2020 law establishes a fair regulatory framework for lending in the state — but it seems some lenders are finding ways around it, such as referring to different types of loans as an “advance.”
A Consumer Reports investigation has found some “advances” have been offered at an interest rate of 490%.
Jay Speer — executive director of the Virginia Poverty Law Center — said despite the name change, it’s still a loan.
“They’re giving you money now and you’ve got to pay it back later for a fee,” said Speer. “But again, they don’t want to come under the Fairness in Lending Act. They don’t want to give people loan disclosures — like the Truth in Lending Act disclosures — to see how much you’re being charged, so they try to pretend they’re they’re not a loan.”
Legislation has been introduced to protect Virginians from these loans. House Bill 648 doesn’t ban probate advances, but it clarifies that they are loans under Virginia law.
While Speer said the goal isn’t to ban these loan products, his group wants to see better consumer protections for them.
He said he thinks House Bill 648 can make it through the session with little opposition.
But probate advances are only one concern. House Bill 330 regulates so-called “puppy loans,” by requiring pet shops to comply with the federal Truth in Lending Act.
Like probate advances, they include high interest rates and nonspecific terms. Yet, Speer noted that what they’re doing isn’t unfamiliar.
“They’re doing the same thing the payday lenders did over 20 years ago, which is claim they’re not actually loaning you money,” said Speer. “That it’s a bank somewhere out of state — and in this case, probably Utah — making the loan to you and therefore, they’re not subject to our usury laws.”
Transportation Alliance Bank or “TAB Bank” has backed these loans.
A National Consumer Law Center report finds TAB Bank helped noted predatory lender EasyPay Finance make pet loans at 130% to 188% interest, which is illegal in most states.
Speer said since TAB is chartered in Utah and supervised by the Federal Deposit Insurance Corporation, EasyPay Finance can “launder” its loan through the bank.
