Internet Installment LoansInstallment loans over the Internet
Draft legislation (HB 1248) requiring on-line creditors to obtain a licence from a retail financing firm to provide instalment credit to Virginia customers has not progressed in this meeting at the House of Delegates. A bill (SB 625), which would have limited the interest on such loans to no more than 36%, also blocked the House after it passed the Senate with heavy backing.
The HB 1248, created by Delegate Terry Kilgore (R-Gate City), Chairman of the House Commerce and Labor Committee, acted on behalf of a research group of industrial and government-appointed Virginia Bureau of Financial Institutions. This bill reflects the unanimous view of the research group and would have created a licence and regulation scheme for on-line creditors without public office to provide instalment credit to customers.
The Virginia Act, which was passed long before the Internet came into being, provides for the granting of a licence for each Virginia site from which loans are made. Therefore, the Bureau will not grant a licence to an on-line creditor without an Bureau in the Commonwealth. A number of lawmakers claim that any new licence legislation that gives explicit credit authorisation to on-line creditors should also contain interest limitations, such as the 36% upper limit in SB 625 above.
Others consider that the market should be free to negotiate interest rate and that market conditions will eventually reduce interest rate levels for the consumer's advantage. It is this conflict of opinion that is the reason why no legislative body made it out of the General Assembly in this meeting. Non-compliance with this law means that on-line creditors must remain compliant with applicable law supporting their credit operations in the Commonwealth.
However, caution is advised as Virginia's Attorney General Mark Herring has been following hostile on-line lending in recent weeks through the effort of his Predatory Lending Unit. Prosecutor General was particularly aggresive in prosecuting on-line creditors for falsely asserting that they have a Virginia licence on their web sites because they failed to comply with Virginia's novelty protection claim in relation to open credits and because they engage in illegal collections work.