In the state of Virginia payday lending is considered legal.
Virginia has a $500 payday loan limit. There is no strictly specified period for taking payday loans, however, it should not be less than 2 pay periods. The APR is capped at 36%, other finance charges include $5 verification fee and 20% loan fee. Criminal actions are prohibited.
For about a century, Virginia had “a separate license for consumer finance loans to allow small, low-interest loans” and only in the recent decade payday and title lenders discovered this license and started to use it to charge triple-digit interest rates. In 2009, the state took restrictive measures and capped payday loan APR at 36%. However, this measure helped very little and the real situation hasn’t changed much as in the light of the looming federal payday loan regulations, “many companies began entering into contracts with Native American tribes to provide loans to consumers over the internet” (By State Sen. Scott Surovell (36th)). Thus, in many cases payday loans are an expensive option to resort to with the annual interest reaching 601%* in some cases. And this is the state of things in Virginia as of today.
Virginia Payday Lending Statutes
In order to operate in the state, payday lenders are required to obtain a license with the Virginia State Corporation Commission regardless of a lender’s physical presence or absence in the state.
There are online lenders that offer payday loans to residents of Virginia, however, payday loans “made by companies who do not have a physical location in Virginia” are illegal in Virginia.
In order to do so legally (and charge APRs in excess of 12%), online lenders have to obtain a Consumer Finance License, yet, currently, there are no internet lenders with such a license in Virginia, thus, any online payday loan practices refer to a Class 2 misdemeanor and any loan agreement would be considered null and void.
Also, only payday lenders with a certain bond in possession can obtain and maintain a license to operate in Virginia.
Here, there is a full “list of companies licensed to conduct payday lending business” in Virginia (as of April 10, 2019).
Loan Amount in Virginia
Rates, fees and other charges in Virginia
- “A licensee may charge and receive on each loan interest at a simple annual rate not to exceed 36 percent.” ( Code Ann. §§ 6.2-1800 et seq.)
- Plus, a loan fee in an amount not to exceed 20 percent of the amount of the loan.
- Plus, a verification fee in an amount not to exceed $5 for a loan.
However, in reality, APR in Virginia can reach 601% (*According to the Center for Responsible Lending 2019: “Typical APR based on average rate for a $300 loan advertised by largest payday chains or as determined by state regulator, where applicable.“).
Maximum term for a payday in Virginia
The minimum term should not be less than 2 pay periods: “The loan agreement shall set forth: an agreement by the licensee not to present the check for payment or deposit until the date the loan is due, which date shall produce a loan term of at least two times the borrower’s pay cycle and after which date interest shall not accrue on the amount advanced at a greater rate than six percent per year.” ( Code Ann. §§ 6.2-1800 et seq.)
- Criminal charges are prohibited in the state of Virginia.
- “A licensee or affiliate shall not knowingly make a payday loan to a person who is a member of the military services of the United States or the spouse or other dependent of a member of the military services of the United States.” ( Code Ann. §§ 6.2-1800 et seq.)
Virginia State Corporation Commission is the official body that regulates payday lending industry in the state of Virginia.
Borrowers who suffered from illegal actions of payday lenders can file a complaint on their website.
The History of Payday Loans in Virginia
- July 1, 2002 – The Legislation allowed payday lenders licensed by the State Corporation Commission (SCC) to open their businesses. Payday lending industry started to flourish.
- 2006 – the Military Lending Act effectively capped payday loans offered to the military at 36% APR. No lender in Virginia is now allowed to offer loans to the military in excess of 36% APR.
- 2009 – Virginia passed HB 12 Payday Loan Act and imposed payday lending restrictions (36%APR, max 20% loan fee). Those measures were aimed to protect Virginia customers and prohibit lenders from charging triple-digit APRs. However, lenders managed to find loopholes to go around the law.
- Illegal Internet payday lenders are one of such loopholes and the reason behind real triple-digit APR rates in the state.
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (the federal rule is expected in November 2020).
(As of April 2019)