Payday Loans around the World – Chapter Forty-Eight
- The maximum loan amount in Virginia is $500
- 27% of borrowers in Virginia earned less than $15,000
- Online payday loan companies are prohibited in Virginia
Payday loans in Virginia are legal by VA Code 6.2-1800 et seq. The official regulator for a payday loan in Virginia is The Virginia Bureau of Financial Institutions.
In this article, we have explored the payday loan industry in Virginia. We have outlined the laws pertaining to borrowers and lenders, and present some great facts and statistics. We’ve also included a section comparing payday loans in Virginia and the UK.
Industry and Market Research for Payday Loans in Virginia
According to the 2013 Center for Responsible lending’s research report “Payday lending abuses and Predatory Practices”, Virginia falls into the group of states categorised as the “States that Impose Some Significant Restrictions on Payday Lending”. Virginia has a minimum loan term of 2 pay periods, and an obligatory cooling off period if a borrower has taken five payday loans in six months. The table below shows that payday loan dollar volume in Virginia has stayed virtually the same since 2009, following the steep drop from the year of 2008.
|State||Payday loan dollar volume||Total payday fees||Average loan amount|
|State||Average number of loans per borrower||Total number of loans||Total number of borrowers|
According to the Center for Responsible Lending, Virginia falls into the category of countries that have between 2 and four payday loan agencies per 10K households.
The change in the payday loan industry in Virginia
Before 2009, payday loans in Virginia were highly popular, with an average of 3,470,236 loans per year, according to a report from Virginia Bureau of Financial Institutions. In 2009, significant changes in Virginia’s payday loan legislation were implemented to protect borrowers from debt traps and reinforce their rights as borrowers. As a result, the number of payday loans per year has experienced a steep decline, from 3,378,047 in 2008, to 459,916 in 2009. The total number of payday lender licensees has decreased significantly as well. The dollar amount of payday loans made, the number of borrowers, the average number of loans per borrower, etc. were also strongly impacted by the law changes.
|Total number of payday lender licensees operating at year end||83||84||84||69||48|
|Total number of locations operated by payday lender licensees at year end||756||791||832||769||664|
|Total number of payday loans made||3,372,103||3,593,401||3,537,395||3,378,047||459,916|
|Total dollar amount of payday loans made||$1,197,105,829||$1,311,902,855||$1,357,007,451||$1,327,345,367||$170,450,511|
|Average loan amount||$355||$365||$342||$340||$371|
|Number of people who took a payday loan||445,891||433,537||449,860||437,025||168,337|
|Average number of loans per borrower||7.6||8.3||7.9||7.7||2.7|
|Average APR charged on payday loans||386||378||359||363||290|
|Average term in days of payday loans made||15||15||16||16||38|
Competition for Payday Loans in Virginia
According to a Yellow Pages search, there are 856 Payday lender companies in Virginia. Another source, the website thepaydayhound.com has made reviews of 13 payday loan direct lenders. The following are the 5 most popular companies in Virginia:
- CashNetUSA – (5 Stars) has estimated costs $75/651% APR. They operate since 2004 and have funded more than 4 million loans in 25 states.
- Payday loan today – (4 Stars) has estimated costs $58.74 / 510% APR. They are Nevada state licensed national leader and have A+ BBB score.
- AAA Payday Cash – (3 stars) has estimated costs $75 / 651% APR. They operate since 2004 and are Utah State licensed. Offering loans in other countries under the premise that they can export Utah law. Used to have an “A” rating BBB score, but are now unlisted.
- Cash Advance Now –(2 stars) has estimated costs of $1,842 / 695% APR. They operate since 2012 but are not state licensed. BBB score is “A-“.
- MyPayDayLoan – (2 stars) has estimated costs of $75 / 782% APR. Operating since 1999, they are Costa Rica based and not licensed.
“24Biz” is US based, payday loan company and made an “Analysis and research of the market of short term loans in Virginia” based on statistical data of 2015-2016. In this chapter, we present the characteristics and patterns of the payday borrowers in Virginia, including a unique comparison to borrowers in the UK.
- 6.1% of the adult population in Virginia used a payday loan;
- The average loan per borrower was $393;
- Income diversity – 27% of borrowers earned less than $15,000. 23% of borrowers had an income of $15,000 to $25,000. 14% of borrowers earned $25,000 to $30,000. 13% of borrowers earned $30,000 to $40,000. 8% of borrowers earned $40,000 to $50,000. 10% of borrowers earned $50,000 to $75,000. 6% of borrowers had an income of over $75,000.
- Borrowers who rent their homes used 55% of loans, whereas 45% of borrowers were home owners.
- Employment diversity – 45% of the consumers were full time employed, 14% were part-time employed, and 11% were unemployed. 10% of borrowers were individuals with a disability, 6% students, homemakers 8% and 6% retired.
Virginia Payday Loan State Laws
According to the laws in Virginia, these are the main rules for payday loans:
- The Loan terms. The maximum loan amount is $500. The minimum loan term is two pay periods. The maximum loan term is not specified. Maximum finance rate and fees are 36% annual interest, a $5 verification fee. Maximum fee per loan is 20% of the loan or a finance charge of $26.38 for 2-week $100 loan. APR for 2-week $100 loan is 687.76%
- The Debt limits. A borrower can only have one outstanding loan at one time. Rollovers are not permitted. (Cannot refinance, renew, or extend). Cooling off period is one day after payment, 45 days after 5th loan within 180 day period, 90 days after payment plan.
- The Collection limits. The fee for Non-Sufficient Funds is $25. Court costs and reasonable Attorney’s fees are allowed, but cannot exceed $250. Criminal charges against borrowers are prohibited.
In 2009, new law changes regarding payday loans in Virginia were put into effect. These changes were made as an effort to protect borrowers from falling into debt traps.
The changes in payday laws included:
- Limiting the number of outstanding loans per borrower at one time to one;
- Payday loans agencies were required to use an established database to track and determine whether a specific borrower is eligible for a loan;
- The repayment term was prolonged to 2 pay period;
- Changes in fees, charges and interest. An annual interest rate capped at 36%, a loan fee cap of 20% of the amount of the loan, and a 5% verification fee cap;
- A borrower cannot take a loan on the same day that he paid a previous loan in full.
An application for a license must be in writing and under oath and in a form determined by the commissioner, and it should include the following:
- The applicant’s legal name, residence and business address;
- If the applicant is a partnership, association or corporation, the application must include the legal name, residence and address of each member, officer and managing director;
- The location at which the applicant will operate
- Other information that the commissioner may require from the applicant, its directors, officers, members, trustees, managing employees or agents;
- The applicant must pay a non-refundable application fee of $500.