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statutory rate cap of less than 36%, Ohio con- tinues to rate a P in the payday loan category.

Pennsylvania: On July 26, 2008, the Pennsylvania Banking Department changed its position on Internet payday lenders to require them to follow Pennsylvania law when making loans to Pennsylvania residents.59 Existing lenders were given until February 1, 2009, to comply; however, enforcement was suspended past that date due to a lawsuit challenging the Department’s new position

  • led by Cash America Net of Nevada, an

Internet lender without an ofce in the state making loans to Pennsylvania residents. The Commonwealth Court of Pennsylvania ruled in favor of the Department, declaring that Cash America was engaging in activities not authorized by state law because it was lending to Pennsylvania residents at a higher annual rate than the 6% permitted by the state’s general usury law.60 With the appropriate license under the state’s Consumer Discount Company Act,61 Cash America could have charged more. Not only did Cash America not have such a license; it was charging sig- nicantly beyond even what a licensed lender could have charged.62 The rate permitted for licensed lenders is low enough to have kept payday lenders from opening up shop in Pennsylvania. Internet lenders will now face

index.ssf/2010/03/a_bipartisan_stall_thwarts_ohi .html.

59 Notice to those Engaging or Considering Engaging in Nonmortgage Consumer Lending to Pennsylvania Residents, 38 Pa. Bull. 3986 (July 26, 2008).

60 Cash Am. Net of Nev., L.L.C. v. Commonwealth, 978 A.2d 1028 (Pa. Commw. Ct. 2009).

61 62 7 Pa. Cons. Stat. §§ 6203, 6213. Cash Am. Net of Nev., L.L.C. v. Commonwealth, 978 A.2d 1028, 1031–32 (Pa. Commw. Ct. 2009).

12 5 Updated Small Dollar Loan Products

the same barrier. Pennsylvania continues to rate a P in the payday loan category.

South Carolina: In June 2009, the South Carolina legislature overrode the Governor’s veto to pass a bill imposing additional restric- tions on payday loans. Among the new requirements now in place is that lenders must be licensed by the state to make loans to South Carolina residents.63 This bill also changed the maximum amount that can be charged for payday loans; however, it only decreased the APR on a two-week $250 payday loan to 391%, not a very signicant change from the prior 460% APR. South Carolina therefore still rates an F for payday lending.

Virginia: On January 1, 2009, changes to Virginia’s Payday Loan Act went into effect, including a requirement that this state’s pay- day loan laws apply to Internet lenders mak- ing loans to Virginia residents.64 A 36% annual interest rate cap was put in place, but both a loan fee and verication fee were also permit- ted.65 With these two fees, the APR for a two- week $250 payday loan has actually increased, from 390% APR to 610% APR. The number of people who are eligible for two-week payday loans has decreased, however, as lenders are now required to give borrowers a repayment period at least two times as long as the bor- rower’s pay cycle.66 To avoid this and other new legal requirements, many payday lenders switched to offering unregulated open-end loan products under another statutory provi- sion.67 The legislature responded by amending

63

S.C. Code Ann. § 34-39-130(A).

64

Va. Code Ann. § 6.1-469.1.

65

Va. Code Ann. § 6.1-460.

66

Va. Code Ann. § 6.1-459.1(v).

67

Va. Code Ann. § 6.1-330.78.

NATIONAL CONSUMER LAW CENTER

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