In Virginia, short-term title lending is about to receive a boon. A new bill signed into law Monday will allow lenders in the state to offer their products to non-residents. The bill is specifically targeted toward increasing business for Virginia lenders.
Virginia title lending
Senate Bill 1367 in Virginia passed the Virginia Senate easily and with a very close vote in the House. The bill officially opens vehicle-collateral same day loans to residents of all states. Previously, loan companies had to check that their customers were residents of Virginia before signing off on their loans. The state has not released exact estimates for the amount of business income this will bring to the state, though car title lenders donated about $240,000 a year for the last five years to Virginia legislators.
Limits on title loans
Virginia has recently tightened regulation on title lending. In 2010, limits were passed that keep title loans to 50 percent or less of the value of the vehicle. Payments are also limited to no more than 12 months. Despite these new limitations, Virginia has some of the most permissive regulations when it comes to title loans. Many of the states surrounding Virginia have recently limited short-term loans much more tightly, effectively pushing the lenders out of the business entirely. This has created a credit crunch for small loans in the region.
Differentiating short-term credit products
The Virginia Partnership to Encourage Responsible Lending and AARP Virginia both released statements blasting Virginia’s Senate Bill 1367.
“People are very vulnerable in this economy and desperately seeking help,” said David DeBiasi with AARP Virginia. “The last thing they need is ‘help’ that turns out to be exploitation.”
Short-term credit products vary widely, and title lending is one of several short-term credit products. Title loans require the borrower to sign over the title of a vehicle as collateral to a short-term loan. The interest rates on these loans vary but are usually higher than traditional vehicle loans.