People are struggling to pay their rent, utilities, and buy food.  We see it everywhere.  Lack of affordable housing, lack of access to medical care, utility shutoffs.  The Commonwealth of Virginia is not doing enough to help people.  Into that gap come those that will exploit desperation– payday lenders, get rich quick con men and the list goes on and on.   

Payday lenders were kicked out of Virginia in 2020.  After years of legislative efforts to foster a safe and viable market for small loans, Virginia lawmakers passed bipartisan legislation—the Fairness in Lending Act. Now, Virginians have access to several lenders offering affordable loans including   consumer finance loans and short term loans both online and in-person.  In addition, six of the eight largest banks now offer affordable small loans and many credit union small dollar loans hit a new high in 2022.  Those lenders that refuse to offer affordable installment loans—the payday and car title lenders— left the Commonwealth.

Now workplace payday lenders that call themselves earned wage access are asking for an exemption from the Fairness in Lending Act.  The 2020 law puts an end to payday and car title lenders who were exploiting struggling Virginias with loans that trap people into debt by forcing full balloon repayments.   Like traditional payday loans, earned wage access for a fee are balloon-payment loans that lead to a cycle of reborrowing. A worker who cannot afford an expense from this week’s pay and borrows from next week’s paycheck will have a hole, triggering another loan. Most workers who use early pay for a fee  do so nearly every pay period – 12 to 120 times a year, with an average of 36 times.  Even worse, some workplace payday lenders try to hid their cost by  adding junk fees like expedited fees, transaction fees and tips.   

Perhaps the biggest problem with giving workplace payday lenders an exemption to the Fairness in Lending Act is the potential for all sorts of new lending products that are unregulated and exploitative.  Over twenty years of legislative battles with payday and car title lenders provided ample proof of their unrelenting drive to evade proper regulation.    

Legislators should concentrate on other methods to help workers instead of promoting a product that just leads to employees paying to get paid early and reducing their already inadequate wages.   

-by Jay Speer, VPLC Executive Director