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Just Just How Virginia’s 2020 Fairness in Lending Act Reforms loans that are small-Dollar

Legislation closes regulatory loopholes, caps rates of interest, and offers classes for any other states

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Overview

After many years of legislative efforts to foster a secure and market that is viable little loans, Virginia lawmakers in 2020 passed bipartisan legislation—the Fairness in Lending Act (S.B. 421/H.B. 789)—to prohibit loans with big last re re re payments, referred to as balloon re payments, and reduce rates. The legislation rationalizes exactly what was indeed a disparate regulatory framework, governed by a patchwork of legislation that permitted payday and automobile name loans with unaffordable re payments and needlessly high expenses, and exposed borrowers to economic damage, including duplicated borrowing and high prices of automobile repossession. Past research by The Pew Charitable Trusts revealed that prior to the reforms, businesses routinely charged Virginians 3 x a lot more than clients in lower-cost states. 1

Virginia lawmakers balanced issues in regards to the option of small-dollar credit with all the urgency of stopping harmful financing techniques, a challenge that officials various other states likewise have struggled with. Virginia’s evidence-based approach develops on successful reforms formerly enacted in Colorado and Ohio that maintained extensive use of credit and measurably enhanced customer outcomes by shutting loopholes, modernizing outdated statutes, and prohibiting balloon re payments. Continue reading