Payday Loans & Usury Laws in Virginia
In 2008, the Virginia General Assembly amended the Virginia Payday Loan Act and expanded the Virginia Consumer Protection Act. Although the Payday Loan Act sets fee limits on interest charges that lenders may charge Virginians for payday loans, when payday lenders can lend money and the time frames for repaying payday loans, payday lenders are not subject to Virginia's usury laws.
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Virginia's Usury Rate
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In Virginia, the legal interest rate is set at 8 percent for most contracts and 9 percent for judgment collections. However, the payday lenders are not subject to Virginia's usury loan laws since the Virginia Code exempts business and investment lenders from the usury laws. Payday lenders may charge over the usury limit of 8 or 9 percent for their payday loans.
Virginia Payday Loan Act
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In the Commonwealth of Virginia, payday lenders must follow the Virginia Payday Loan Act governing payday lending practices. The Payday Loan Act governs the lending practices for all payday lenders in Virginia. In Virginia, payday lenders that violate the Virginia payday laws can be found guilty of a Class 6 felony, punishable by criminal sanctions or civil fines. Payday lenders must be licensed to conduct business in Virginia.
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Payday Loan Limits
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Payday lenders may not renew or extend loans, provide more than one payday loan at once to each borrower, cannot provide payday loans on the day Virginians receive their full paychecks or garnishee military pay. Additionally, payday lenders must maintain an active database to verify that a borrower does not have more than one payday loan at one time, and payday lenders must comply with Virginia's interest rate limits for payday loans.
Interest Limits and Due Dates
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Although payday lenders can exceed the allowable interest rate of 8 or 9 percent, payday lenders may not charge more than 36 percent for interest or may not charge more than one-fifth of the loan amount or 20 percent for interest charges and may only charge up to $5 for a database fee or verification fee. Additionally, borrowers have two times their normal pay cycle to repay their loans. For instance, borrowers paid on a weekly basis by their employer must have at least two weeks to repay the payday loan.
Payday Lender
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In Virginia, a payday lender is a financial institution, lending agency, merchant or any other individual providing short-term loans in exchange for a borrower's assignment to income, check or any other form of future rights to payment.
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References
- FindLaw.com: Virginia Interest Rate Laws
- VA.gov: State Corporation Commission: Notice to Virginia Payday Loan Customers
- Code of Virginia: Title 6.1 Banking and Finance: Section 6.1-468 Criminal Penalties
- Code of Virginia: Title 6.1 Banking and Finance: Chapter 18 Payday Loan Act
- Legislative Code: Code of Virginia: Section 6.1-444
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