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Virginia Fairness in Lending Act of 2020 Reforms Small Credit

This particular fact sheet had been updated Nov. 11, 2020 to make clear certification needs for online loan providers as well as the applicability for the Virginia Consumer Protection Act to loans that are small-dollar.

After several years of legislative efforts to foster a safe and market that is viable little loans, Virginia lawmakers in 2020 passed bipartisan legislation—the Fairness in Lending Act—to reduce prices and prohibit loans with big last repayments, referred to as balloon repayments. The legislation rationalizes just what was indeed a disparate regulatory framework, governed by a patchwork of laws and regulations that permitted payday and automobile name loans with unaffordable repayments and needlessly high expenses and exposed borrowers to economic damage, including repeated borrowing and high prices of automobile repossession. The latest measure produces more uniform guidelines for lending to borrowers with slim or damaged credit records, no matter whether loans are created at a retail location or online or if the lender is a payday, name, installment, or technology firm that is financial. This dining table summarizes key elements of the brand new legislation. To learn more, start to see the Pew Charitable Trusts’ issue brief, “How Virginia’s 2020 Fairness in Lending Act Reforms Small-Dollar Loans.” 1

States of Innovation

Limitless interest fees; no charge limitations

Until enactment, Virginia ended up being certainly one of just six states where lenders that are payday under open-end credit statutes without interest limitations. The reforms allow mainstream open-end credit (loans without particular payment durations, comparable to bank cards) but direct higher-cost loan providers to other statutes shown below.

Title and payday lending overlap

Restricted enforcement abilities

Possible “choice of law” loopholes