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Just How Virginia’s 2020 Fairness in Lending Act Reforms Small-Dollar Loans

Legislation closes regulatory loopholes, caps interest levels, and offers lessons for any other states

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 payments, referred to as balloon re payments, and reduce rates. The legislation rationalizes just just just what have been a disparate structure that is regulatory governed by a patchwork of legislation that permitted payday and automobile name loans with unaffordable re payments and needlessly high expenses, and uncovered borrowers to economic harm, including duplicated borrowing and high prices of vehicle repossession. Past research because of The Pew Charitable Trusts revealed that prior to the reforms, businesses routinely charged Virginians 3 x a lot more than customers in lower-cost states. 1

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that maintained extensive use of credit and measurably enhanced customer outcomes by shutting loopholes, modernizing outdated statutes, and prohibiting balloon re re payments.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