VIRGINIA POVERTY LAW CENTER: PREDATORY LENDING IN MINORITY COMMUNITIES
Michael Pope
Welcome to Transition Virginia, the podcast that examines the transition of power from Republican to Democrat. My name is Michael Pope and I'm joined via Skype with the co host to Transition Virginia who's joining us all the way from Richmond, Thomas Bowman. Thomas, how you doing?
Thomas Bowman
I'm doing great. It's a beautiful sunny day here in Richmond. Life couldn't be better.
Michael Pope
So you have decamped from the People's Republic of Arlington. Is that right?
Thomas Bowman
I prefer to think of it as I invaded the capital city of the South.
Michael Pope
You're not the first and maybe not the last. So, today on transition Virginia, we are going to be talking about the topic of predatory lending. There was some major landmark legislation that happened this year, the Fairness in Lending Act, and I want to get into why the Act was passed and what it does, with our guests for today. We've got Jay Speer, Executive Director of the Virginia Poverty Law Center, and Dana Wiggins, the Director of Outreach and Consumer Advocacy. Thanks for joining us today.
Dana Wiggins
Thank you for having me here.
Michael Pope
So Dana, let's start with you. What exactly is the Fairness in Lending Act and why is this such a big deal?
Dana Wiggins
Well, it's a the Fairness in Lending Act of Virginia Fairness in Lending Act essentially regulates high cost lending in Virginia moving forward. The Act itself will not become effective until January 1 of 2021. Essentially, it will change the way that we regulate high cost lending in Virginia moving forward. So it is a big deal for those folks who are regular users of high cost credit so that would involve payday loans, car title loans, open ended line of credit loans that are high costs, both in store and online. It also covers loans over the internet and and other kinds of sundry things in that scope or space. So installment loans and online that are high cost would be covered under that as well.
Michael Pope
And Dana explain to us why this is needed, like what give us a look at how this might be a problem for a specific individual, perhaps somebody that calls the hotline that you ban the phones.
Dana Wiggins
So, yeah, so we run a helpline a hotline for folks who have issues with predatory lending, or any kind of issue around the predatory loans. So from "Should I get this?" to, "It's really affecting my life in a negative way." Obviously, a lot of the calls we get are the latter. And, you know, "This is, you know, essentially pulling the rug out from under me, I'm drowning, and how do I how do I get help?" So we do hear a lot of those stories. We just got a referral from the AG's office actually a couple hours ago. So we we talked to consumers all the time who this kind of loan is one that, you know, it's not new that loans can make people feel like they're drowning in debt, and it can pull people down. I mean, I think people remember a lot of the household finance issues from decades ago, and issues around credit cards can often get the best of a lot of people. With high cost lending, it's a little different because we're talking about triple digit interest rates for the most part. So it's not just expensive, it's very expensive, and they sort of exploit people at their most vulnerable moments and so they are when they are having, you know, a really hard time struggling to keep up with bills, lack of income in the sense that if their income is just short of the filling all of their monthly obligations, many times they go to these lenders. And this reform was needed because for many of those borrowers, they're just stuck in these loans. They're caught in what we call the cycle of debt and so many of them would get a loan, but they get another similar loan to cover the first loan because the first loan after the first month becomes more of a burden on their budget than a help. And so a lot of people were just drowning and it it honestly keeps people who are trying to move up the economic ladder and it keeps them down. And so it keeps them from being able to move ahead when they're just stuck with hundreds of percent of interest on multiple, many times multiple loans over decades of time. I mean, people get stuck in them for quite a long time. Even if they temporarily leave many times people end up getting sucked back in.
Michael Pope
And Jay Speer, take us back to the late 1990s. That was a period when predatory lending kind of exploded in Virginia. So loan sharks of course have always been around, but what was the dynamics? What was the situation in the late 1990s that led to this explosion of predatory lending in Virginia?
Jay Speer
So I've been doing Poverty Law for a long time and when I first started doing this work, nobody would lend to my clients, but somebody figured out along the way that you can loan money to low income people and exploit them. And if you do it to enough people, you can make a lot of money doing it. And so that's kind of where payday lending came from. But basically, they started setting in Virginia, they started setting up around the military bases because they know they can exploit military members. And they claimed that they were not subject to Virginia law, because they were the loans were being made by banks that were regulated by other states or the federal government.
Michael Pope
And so all of this led into a reform that happened in 2008 that completely changed the landscape. Jay, what was that like and described sort of the politics of the General Assembly Session in 2008 that led to that reform?
Jay Speer
So they originally passed the Payday Loan Law in 2002 and after six years of this, and lots of bills being brought in the Interim, the we finally got to the point where people were really fed up with this. The the main quality of the payday loans and in this kind of loan, payday loans and car title loans have been doing this for about 20 years. It's nothing but exploitation of borrowers. So what we're going to have with this new law is a situation that is actually loans and not some sort of a scam, that look that looks like a loan. In 2008, there was a lot of pressure to change the law because a lot of people were complaining about these folks. Over 800 some businesses it exploded when they authorized that they gave it their legislators refer to this as regulatory certainty, when you give the lenders the ability to do this with regulatory certainty, then they will exploit it. And so they in 2008, they had lots of people complaining about this, complaining to their legislators. And so there was a there was a real move to try to do something about the fact that they were, as Dana said, they were, they're exploiting people by trapping them in the loan. It's not so much the cost of the loan, but it's the way they set it up so that you have just keep getting a loan after loan. In fact, in 2008, we discovered like 90% of their loans were just reloans because they were trapping people. So well, that did a good job of it. So what happened was the we had a bipartisan push to change the law. The payday lenders hired a whole lot of lobbyists, because there's so much money in this, they can afford to hire a lot of lobbyists. We think they had as many as 20 or 30 lobbyists. A lot of the nonprofit organizations like us were lobbying for reform. We had a bill that passed the House that was not a bad lot bill, bought in the Senate unfortunately, changed it and really watered it down. But even though it was a pretty weak bill when it finally passed, as soon as 2009, when the law went into effect, as soon as it went into effect, a whole lot of the payday lenders sort of tried to avoid it, even though it didn't make them do much. They immediately jumped to another loophole, how to open credit.
Thomas Bowman
Can we localize this issue a little bit more? When I was with Delegate Krizek, we actually hopped in a car and counted that there were 14 title lenders in the six mile stretch of Mount Vernon that represent that he represented. And what we noticed, was that you didn't just see title lenders in poor neighborhoods, or in just any old strip mall. They were always put near neighborhoods of working class minorities. People who they weren't the lowest of the low on as far as wealth goes, but they were still working their way up to building you know, financial freedom. So what what is it about their business model that encourages that?
Dana Wiggins
It's just a huge amount of inefficiency by design.
Jay Speer
The root one quarter has a lot of low wage jobs located there, right? So when people are going to work, what they try to do is have you see their business. I don't know how many people told me that I talked to when the helpline, well, I kept riding by that place every day every day. And then finally, I just decided that I really needed help and the government wouldn't let these folks be in business if they were really that bad. But I found out when I got the loan, that really is that bad.
Thomas Bowman
Okay, so how does somebody find their way into one of these title lending spots?
Dana Wiggins
The majority of people find them through advertising. I mean, obviously, some do billboard advertising in different parts of the state. Some of them do a lot of TV ads, a lot of late night TV ads. So for those folks who are up late, worried about money, they often have ads. And if you listen to any radio station of any kind, most radio stations, most very popular radio stations, I should say, of any type. So it doesn't matter if it's talk radio or if it was-
Jay Speer
Dana, wouldn't you say it's a particular, you see a lot more of it on a particular type of station?
Dana Wiggins
You'll see them on AM talk stations, so the talk radio Conservative stations, and then you'll hear them on any kind of targeted marketed group radio stations. So if you're in Richmond, you'll hear it on, you know, some of those stations that are sort of minority focused. It doesn't matter which minority. You'll hear it on there. So anyone any radio station that has a real specific focus for their group, not necessarily sort of like the general popular music, but a lot of the other ones you'll see a lot of radio stations. Even when we did our own radio ads to help or to buy alert people that there was help through our helpline or a hotline, you know, we were competing with ads from lenders at the same time. So, you know, you'd see them on popular radio stations. And you know, if it's a, you know, a Black focused radio station or Conservative talk, radio show radio station, they were going to have those ads running. And almost every single time there was an ad time available, you would have at least one predatory loan ad.
Michael Pope
So can we go back to what Thomas was saying before about the number of these storefront locations? So years ago, this is also how I got interested in this topic, is because I used to write for a newspaper called the Mount Vernon Gazette and people in Mount Vernon were really, really upset at the number of these institutions that kept popping up. It seemed like every few months, there was a new one that opened up. Now recently, I was looking at some numbers that came out from Pew Charitable Trusts and they said that the payday lending locations have 500 unique customers a year. And a car title location has 300 unique customers every year. That's basically less than one a day, right? I mean, so think about this, your entire storefront operation is less than one person every single day. Why do they have so many of them?
Jay Speer
It's their business model to be visible. And they purposely go out and have lots of lots of buildings and places where they people can see them. That's that's their marketing plan. And the other thing is, their whole business plan is to turn borrowers you don't need a lot of borrowers when you just need to get somebody in. There's a whole bunch of quotes from CEOs of payday loan stores who talk about how you get this you get the customer in and you just churn them over and over again. You don't need that many customers you don't need a lot of new customers.
Dana Wiggins
Yeah, I mean a lot of bonuses if you talk to former payday loan and car title loan employees, which we've talked to quite a few over the years, you know, a lot of times they would get bonuses for making sure that somebody renewed a loan. So if they paid off their loan and walked away, that was a bad thing. They wanted to incentivize their staff to convince people to keep money. I remember talking to a gentleman back in 2007, when I first started working on this issue, and he said he was about to make his final payment. He had been paying for five years on the loan, and he finally went in to make his final payment. And he just asked, like, "Can you just like, show me like the list of, you know, all the paid like how much I paid for the life of the loan? I just couldn't quite figure it out, feels like I've been paying a long time." And they gave him the printout, and he had paid $16,000 worth of interest over the life of the loan. And he broke down in tears, because he realized that every time you know, he's like, "When I thought about it, every time I was about to pay it off, they would tell me, you know, you need that money more than we do. Why don't you just take out another loan. I'm sure you could use it" and he would do it every single time. So in the end, it took him that long to pay it off but it also just meant that he was paying so much money. He was like, "I could have put, I could have paid for college for one of my kids, I could have bought a car with that money that I desperately needed." I mean, he just when he saw in black and white, how much he had paid at the end. And they even when he paid it off, he was at that point, he had not paid it off several times and and had gotten a new loan. And he finally was like, "You know what, I'm actually going to pay it off." And they were begging him not to do it in the moment, the staff, of the payday loan place and she just, yeah, they were they were like, "Don't do it" because they knew that customers who walked away so from the, you know, from the employee of the payday loan establishment, and this is only from a few discussions that we've had with former employees, you know, they would get a bonus for when people renewed but they also would get dinged, if they or you know written up if they let too many people pay off their loans and not re borrow.
Jay Speer
The people that work in the pay loan stores told us that their best customer was the person on a fixed income, usually Social Security. And the reason for that is, they never could pay off the loan. They would each month they would come in, they would pay it off, and then they had to get a new loan because then they couldn't pay their rent. And they never got any extra money, like working overtime, or tax refunds or anything like that. So they just love these, these borrowers. And they set out to and I we had, I think the longest loan I ever saw was a guy who got 48 for four straight years, every single month, he got the same loan just reissued over and over again. But we saw a lot of that we saw a lot of people in Social Security getting it for two, three years.
Dana Wiggins
Well, and then the 2008 law changes like during that Session, one of the options during the Session that was offered up by the lenders that they were trying to limit, the first set of bills were limiting the total number of loans that somebody could have. So instead of people going back to back to back to back, trying to make it so that you couldn't be indebted the entire year, year after year. And one of the things that came out of those discussions was that the lenders needed people to have at least eight loans in a row for them to feel like they made their profit margin goals.
Jay Speer
After we passed the law in 2008, payday lending dropped 80% in Virginia. And the main two reasons they did that is because they, the reform said you can only do one loan at a time. So people couldn't most people we talked to had at least four or five loans. And the other thing is they let people you had to give somebody two pay periods to repay, and so Social Security folks got two months to repay, instead of getting 12 loans a year they started getting five or six, that really cut into their profit margin, and payday lending dropped 20% but unfortunately, a lot of those payday lenders then just shifted to some of the loopholes.
Thomas Bowman
Well, let's compare and contrast these different Legislative Sessions when we come back from the break. Jay Speer and Dana Wiggins of The Virginia Poverty Law Center, can't wait to come back and talk after the break.
Michael Pope
And we're back on Transition Virginia we're talking about predatory lending with Jay Speer and Dana Wiggins at the Virginia Poverty Law Center and let's start by setting the table of the discussion of the General Assembly Session this year by talking about money. Campaign finance records show that these businesses donated quite a lot of money. Loan Max, Car Title Lender and Nova isn't I think an online lender. Titlemax, Check Into Cash, Fast Auto Loans, Advance America, all these groups donated a ton of money to, mainly to Republicans but also to some very key Democrats, especially Senate Democrats. Chief among them, was Loan Max, that handed over a quarter of a million dollars, just this most recent campaign cycle. Going into the Session this year, what would the political dynamics in terms of the allure of the campaign dollars and the hold these businesses had on lawmakers?
Dana Wiggins
I think it's important to remember that it's not necessarily that $1 given equals a vote, right? But it is about, you know, I mean, so for example, we can't necessarily go to every legislators like fundraising events, right? But for those businesses that can, they go to every single event and they spend the maximum amount of time. They have at least them and maybe a few other of their staff there too, or their lobbyists there. I mean, all of those things that are about raising money, it just gives them time and an access to talk with them. You know, the more I mean, I probably would be able to convince anybody of anything if I had enough time to do it. And so you know, the more time you spend with somebody in their, in their ear just talking about that, and maybe a few other things if they have other clients that they're working for, and they become people that you trust their opinion, because they've given you information about things you need to know about, maybe for other of their clients over time. I mean, when you think about the main lobbyist for Advance America at one time, you know, he was the main lobbyist for the Credit Union League and it wasn't until when the payday lenders picked him up. The Credit Union League got forced by their largest member to give him up as their lobbyists. But he didn't stay with the Credit Union League, he went with the payday lender, and he continued to do that. You know, he was still their main lobbyist. He wasn't registered for them this year, but he was their lobbyist this year.
Michael Pope
So lawmakers like to tell themselves that they write legislation, but in reality, what happens a lot of times is people like you guys and writing legislation. Jay, take us on the inside of the creation of the Fairness in Lending Act and how it was put together and what you were trying to accomplish? And also, I'm kind of curious about strategy. Were there some sort of Easter eggs planted in there that you thought, "Well, maybe we could take this out as part of a negotiation that ended up staying in there."
Jay Speer
The Pew Charitable Trusts folks came to us in I think, August and wanted to know if we were interested in trying to pass legislation that was going to be different kind of legislation than we have pushed in the past. We've tried to cap the interest rate, we've tried to close the loopholes. But this was going to be, they were suggesting a really comprehensive law that would not only cap interest rates, but allow lenders to charge extra fees that they knew that the lenders needed to in order to make these loans. So that when we say Fairness in Lending we mean fairness that borrowers and the lenders and but of course, we knew that the folks that are already making these exploitative loans, like the payday and the cartel, and there's we're going to be totally against it. So the Pew Charitable Trust folks really helped us draft the law. We worked, really we spent a lot of time drafting this law with them and with the Attorney General's office and getting it right in without, with consumer finance companies, people who are good lenders. So we spent a lot of time drafting this, as far as-
Dana Wiggins
That idea didn't necessarily come just from Pew Charitable Trust, though. So in the sense that the Colorado actually had a very similar thing passed back in 2010. And so we looked and we looked for over many period of years at the Colorado model, we just weren't sure that anything like that would work in Virginia. And then Pew Charitable Trusts tried the Colorado model in Ohio. They took that idea to Ohio, where they had a super majority Republican legislature and Governor and tried to do it there and were successful. And they weren't sure but asked us if they thought that that same Colorado type model could work, if it worked in Ohio, could it also work in a place like Virginia?
Jay Speer
So the other interesting strategy thing here is that we, we hired a private lobbyists group to help us to come up with a strategy group, we felt like that was necessary to have somebody with boots on the ground all the all the time, because we knew they'd come at us with a lot of other lobbyists. And then we also we had a lot of heartburn over putting in a long, detailed bill to close all the loopholes and different things to different statutes which we thought was necessary politically. The danger in that is that when you put a big bill in like that, it's easy for people to attack it and say, "Well, you know, I just pick things out of it, and talk about them by itself." And to say, "Well, this is just too complicated. You need to study this more." So we did have a lot of anxiety about that. But as far as putting stuff in there that we were willing to take out, we felt like this was a fair law for lenders and borrowers. Sure, if the payday lenders and car title lenders had asked for some changes that we didn't think would hurt people, that we thought was necessary to get the bill passed, we probably would have considered that. But they never asked for any changes. It was all or nothing for them. I think they just thought they were kind of rolled over. It's like they do every year. And so they were just I think they were surprised and they didn't feel like they hadn't negotiate any. They have one business model, these folks that are against it, and that's all they want to do.
Dana Wiggins
Although it is important to also know that Advance America, for example, also operates in Colorado under the Colorado model, which is actually less profitable for them in Colorado than the bill that we proposed in Virginia.
Jay Speer
Actually, three of the biggest payday lenders in the country, lobbied in the Virginia General Assembly and told legislators that they could not do these loans under this new law, but in fact, they were already doing loans in two other states, Ohio and Colorado, and so that was just not truthful.
Dana Wiggins
And in Colorado, it was they had been doing it for the last 10 years. It wasn't like Ohio where it had maybe only been a year and a half since their law had passed. In Colorado, they had been doing it for the last 10 years. So it was a, it was definitely a missed truth on their part.
Thomas Bowman
How does the General Assembly react to that kind of testimony?
Jay Speer
Well, I think they, they were smart enough to say that they were going to have to go out of business because we there's a lot of legislators that are or can say that they're very concerned about putting a business company out of business, and then the consequential loss of jobs with that. So I think that is a that's a good ploy on their part. But the fact is that we had lenders that are already here that are willing to do the loans in other states, plus we have new lenders, who will come to Virginia, and are happy to operate under the new law.
Thomas Bowman
That's a fascinating point. So you've got new business that you've been able to create by regulating an old business.
Jay Speer
They testified during the committee hearings. That was actually one of the highlights of the Committee Hearings is that you had all these businesses come in and say, "Look, we would come to Virginia, and we'd offer loans of 36%. But we cannot do it now, the way the law is structured. You have to create this law so that we can come do business."
Michael Pope
Jay, what was your read on how lawmakers were reacting to that testimony that they were hearing from these businesses that wanted to come to Virginia and wanted to have jobs?
Jay Speer
At least two companies hired their own lobbyists. And then there's the Association of Consumer Finance companies that had a lobbyist. When they met privately legislators, I think they were really interested in this and talked about what they're, what the loans are going to be and that sort of thing. And I think it was very helpful. Unfortunately, when they testified in the Committee, you know, Virginia's got a crazy legislative system, where these bills are heard maybe one time. Everybody has like one or two minutes to say something. And so the what the payday in the car title lenders did is try to pick us off by criticizing these other loans and saying that they weren't good loans and stuff like that, but so that they may have hurt us a little bit in the committee hearings, but private meetings, we think they were very helpful.
Dana Wiggins
Yes, I one of the things that I think is really like hypocrisy at its height was in the House when the payday lenders were getting some legislators to ask questions of these new lenders that wanted to come in and they were picking apart their business model and saying, "Well, you're gonna directly debit from somebody's bank account?" And I was like, that's exactly what they do already.
Thomas Bowman
Oh yeah. That is how 2020 works.
Dana Wiggins
And so it was really it was like, kind of it bordered on madness, to be honest, for me to hear a legislator, accusing a new lender of coming in that they may deign to debit automatically from somebody's bank account, when that's exactly what all these other terrible lenders were doing in Virginia for quite some time. So it just sort of boggled my mind that like I they clearly one didn't understand the business models of the lenders that we already have. And they were just easily convinced, somehow, that like somehow these new lenders coming in, couldn't possibly be doing the right thing by advocating for this law change. It's not like the law change, for example, was like, only beneficial for borrowers. Lenders, were still able to make money and I think these other lenders saying "We would like to come in" was a sign that it's not like borrowers are walking away with free money. It's a sign that like we were trying to be balanced, at least I hope that's the sign that we were trying to get.
Jay Speer
One thing that Dana and I had to be convinced about was that this was, this was a good model, because it wasn't just an interest rate cap. It allows them to charge some other fees. And we Dana and I decided that you know, we have talked to so many borrowers over the years that don't really want to get rid of payday loans and that sort of thing. They just want to have a product that they can afford to repay that doesn't trap them
Thomas Bowman
And pay off.
Well, let's take a quick break and when we come back we're gonna, we are going to keep talking to Jay Speer and Dana Wiggins of the Virginia Poverty Law Center, about what the plans are for moving forward in future sessions under COVID and how the Coronavirus has impacted their operations.
Michael Pope
And we're back on Transition Virginia. We're talking to Jay Speer and Dana Wiggins of the Virginia Poverty Law Center. So the Virginia Fairness in Lending Act was passed. It was a sqeeker at times, but it got through the House and it got through the Senate and there was this rival legislation we haven't even talked about that could have derailed everything. That kind of dived on the bind and did not end up derailing anything. So then it gets to the Governor's desk and this is where the story kind of takes another twist. Dana, what happened with the Governor? What did he do?
Dana Wiggins
Well, so the original bill, as it was originally introduced, had a January 1 2021, effective date. And we put that into the bill, because we knew that it would take time to develop the regulations and put them in place and allow for new businesses to set up shop for January 1. So during the course of the Session in the Senate, a delayed enactment was added by six months to have it as it passed the legislature, it would be effective July 1 of 2021, which means that we would have in a whole entire Session to have the lenders and we still may have that, but there would have been an entire session of them trying to take down the law that hadn't even gone into effect yet.
Michael Pope
Now explain the politics behind that. So that was a suggestion that was an amendment that was created by Senator Scott Surovell after Senator Dave Marsden raised this opposition and he said, "We're moving too fast too soon, we should just we should do it in summer of 2021" and then Surovell had this amendment. I got the sense that he didn't really particularly want that to happen, but he felt like it would address what Marsden said. Explain sort of what happened in the Senate Committee and and how that changed the dynamics.
Dana Wiggins
Well, let the lenders I think, to Jay's point earlier, really wanted to put the brakes on this legislation. I think they thought that at some moment, and there were lots of moments in which it could have happened, that we went through the wringer with this legislation, but I think there were lots of moments where they thought they were just going to kill it outright. But at one point in the Senate, I think, it looks like we might have actually been able to squeak out of Committee and then things took a turn when Senator Marsden a few people left the committee room, which is always a problem when your votes walk out the door to go make votes in other committees. And then Senator Marsden decided that he wasn't comfortable with us getting all the things that we were asking for. We tried to be thoughtful with the legislation to think about it from a lender and borrower perspective but he thought that, you know, it needed more time to marinate and that we needed more time to think about it. At first, he wanted it to be a study. And honestly, having had payday lending in Virginia, for over 20 years now, and having had other study bills of this issue in the past, through the legislative process, it seemed hard to imagine what else needed to be studied.
Thomas Bowman
So Dana, speaking as a former staffer, when we propose alternatives, like let's send it to a study, that really means we would rather it didn't pass and we don't want this policy to happen and let's wring our hands of it. And hopefully this other committee or whoever's doing the study will do all the dirty work for us.
Dana Wiggins
Exactly. And so I think Senator Marsden wanted to not be seen as a jerk.
Jay Speer
When Marsden made a motion to put a Reenactment Clause on the legislation, in the committee, what that means is you have to pass the bill again next year, which effectively kills it because you have to go through the whole thing again.
Thomas Bowman
And and there are legislative changes to those seats all the time. Right, from year to year people die, people retire, people move on. Yeah, sorry, continue with your point.
Jay Speer
Senator Surovell made a counter motion to delay the enactment until July 1 2021. And I think it's pretty clear that he was trying to help us by and he thought that would defeat the Reenactment Clause and get the bill passed.
Michael Pope
And this is where Governor Northam enters the picture and the says, "Hey, remember that delayed Enactment Clause that emerged from nowhere during the senate committee meeting? Let's get rid of that."
Dana Wiggins
Well in part that that was due to COVID. I mean, I think in the beginning part of March when things hadn't been closed or anything yet, but people were getting worried and I started not seeing anything on grocery store shelves, I think started to immediately consider all of the people who probably didn't have money set aside to stock up on groceries, who were probably borrowing money. You know, this time of year is a time of year when people are typically paying off their loans. They're using their tax returns. They're paying off any loans that they had that were outstanding if they could. And that way they kind of are a little free and clear for at least a portion of the year. But I almost immediately thought about all the people who were probably re borrowing after having probably just used a tax return to pay off their loans. They were probably re borrowing immediately in order to cover the cost of filling up the car with gas, making sure you could get whatever scraps were left at the grocery store in those couple of weeks when things were getting dicey, where buildings were starting to shut down. I mean, I think the Governor, his office really honed in on the fact that people probably are going to be borrowing. People were their jobs were ceasing to exist. People who are on the edge often have jobs that are hourly wage jobs, who are, you know, working all the time, but not necessarily bringing in a ton of money all the time. And maybe they relied on a loan to get to float them through the end of the month. You know, if they then didn't have a job that I mean, you know, sometimes you can't get a loan when you have when you don't have a job. So people might have done some borrowing before their jobs cease to exist.
Jay Speer
The other dynamic here though, is by changing the enactment date to July 1 2021, it gives the payday and the cartel lenders another shot at defeating it in the next General Assembly. There's a different dynamic when the law hasn't already gone into effect. You know, now the law will have already gone into effect, maybe only a few days before the Session starts. But we'll already have a bunch of lenders licensed and everything ready to go. And it's a very different thing to ask the legislature to change what you've already got set up, rather than to do away with something hasn't started yet.
Michael Pope
Okay. So the Governor puts this amendment on it that gets rid of the Reenactment Clause and moves the effective date up to January 1 2021. That goes, of course, back to lawmakers. They come together for their socially distance, Reconvene Session and House says "Sure, yeah, we're fine with your amendment." The Senate, though, there was all this bizarre drama where they voted on it, and then they brought it up again and they brought it up again and people are changing their votes. And I don't know what was going on with that. But at the end of the day, Marsden voted against it and Saslaw voted for it. So right. I mean, that's -
Jay Speer
There are actually four votes. There were three votes on the Senate Bill and one vote on the House bill when it came over. One Senator voted yes, twice and no twice. I think one if some Senators voted yes once and the no three times-
Michael Pope
This is really getting into the kind of the sausage making here of legislating. Why, explain to me I still don't understand this. Why were these Senators changing their votes on this at the last minute, several times?
Dana Wiggins
Well, I think some Senators the first time around, when the change that the g]Governor proposed prevailed, Senator Chafin said that he mistakenly voted yes, when he intended to vote no. And Senator Peake, didn't vote at all, and said that he intended to vote or no, but he didn't vote. And so they reconsidered the vote. There was again much discussion and when they reconsidered the change the Governor proposed, died in that moment, because both the Senators who wanted to vote no did vote no. And then Senator Cosgrove, who intended to vote yes, said he accidentally voted no. So, that was part of the original confusion. Then there had to be a reconsideration of the reconsideration, which I honestly had never seen happen before. But there was a reconsideration of the reconsideration of the original vote.
Michael Pope
Jay, what's your theory on all the mind changing there at the end?
Jay Speer
So I've seen this a lot when there's a close vote on a bill that legislators may want to vote against, but are afraid of being on the wrong side of it. It's one thing to be one thing to vote against this bill and to have it defeated. It's another thing for it to pass, and you're one of the few people that voted against it. And I think if you watch them in committees, and I don't know whether this is what's happening on this particular bill, but I've seen this a lot. When it looks like something is going to pass and people decide at the last minute, if you look at the Committee vote in the House, Senate, Commerce and Labor, a lot of people flipped over at the very end, because it looked like it was going to pass and they wanted to be on the majority and they did not want to be on the wrong side of this.
Michael Pope
One of those is Senate Majority Leader Dick Saslaw, who's been a longtime champion of this industry in general and Loan Max in particular, he got $25,000 from Loan Max and the Senate Democratic Caucus, that he's in charge of, got $30,000 so he's got a vested interest and a history of supporting this. And I believe he also voted against the bill in Committee but at the end of the day, he was a yes vote for this thing. Right?
Dana Wiggins
He was indeed a yes vote and I actually haven't talked to him about that vote since it happened. But you know, I think in the end, a lot of his constituents, believe it or not, would have expected him to vote for the bill. And maybe that was part of it, maybe it wasn't. You know, if you talk to a lot of folks in his district, even though he claims he doesn't have poor people in his district, he does. And he has a lot of working people in his district.
Thomas Bowman
Skyline.
Dana Wiggins
Yeah. And he, you know, I mean, for a lot of folks who participate in Democratic Party politics in Northern Virginia, they a lot of them that I had, you know, spoken to over the years, "How can we like fix this problem of predatory lending?" And I was like, "please talk to your Senator." So I think, you know, maybe maybe it was his constituents. Maybe it wasn't. I mean, maybe it was Jay's theory that he didn't want to necessarily be on the wrong side.
Thomas Bowman
But to quote Tommy Norment real quick, "Very slim political victories have a way of encouraging political evolutions."
Michael Pope
One more topic before we wrap this up, I really appreciate you spending time walking us through all this is what happens now? So this bill does not take effect until January 1. That gives us several months during the worst economic crisis since The Great Depression, where people are really struggling and trying to make ends meet and their desperate. Are we going to see a record amount of people walking into the Loan Maxes and the Title Maxes and getting these loans at 300% over the next few months?
Dana Wiggins
So if the last recession is any indicator, even though this is unprecedented, if you look at our last recession, pay lending went down, not because of reforms, but because people didn't have work to that you know, to get a payday loan you have to have a payday. And for people who don't have regular paydays, it is harder to get a loan when you're unemployed. Now, that doesn't mean you know, getting an unemployment check would be considered income enough to get a payday loan. But some people may feel less confident knowing that the pandemic and an unemployment insurance, of course, is temporary. And regular unemployment is very low. I mean, it, there may be people who honestly realize that they can't afford it, which is kind of what happened in the last recession. Even when somebody did have unemployment, they didn't necessarily get as many loans because they knew they couldn't afford them. And then, you know, on the flip side of that, is there will be people who are working, but maybe they can't work the same hours that they used to. And so they're working but they do need something to supplement their income. If they're working, they don't get the Pandemic Unemployment Insurance anymore but you know, they're going back to maybe a job where they're still making maybe not a livable wage. And they also aren't working full time. Maybe they're only working three quarters time or halftime, because of maybe not everybody is going back to these businesses because of the current crisis. And so I think there will be both sides of that will be true, there will be some people who won't be able to get loans um because they won't have income coming in. And then there will be some people who have to feel like they're gonna need to get loans because they're not, they're working, but they don't aren't getting they aren't making what they were. And honestly, some people were making more on the Pandemic Unemployment Insurance, which assumed $15 an hour wages. You know, that's not the minimum wage here in Virginia, at least not currently. And so, you know, many people were making a lot less than that as their regular wages. So going back to their regular wages and maybe not having the same hours, they're going to probably be looking for ways to supplement their income to just keep afloat. And then the flipside of that is that there are car title lenders that will loan to people who don't have have jobs.
Thomas Bowman
While I've got the Virginia Poverty Law Center on the phone, I've got to ask a question about the minimum wage. The Governor made a political decision to postpone the minimum wage just now, they would say just a few months, but I represented Organized Labor, the laborers who make like $12, $13, $14 an hour stripping asbestos, when I was with Labor's Employers Cooperation, Education Trust, and now with Resolute Strategy Group, I'm seeing that this disease seems targeted to really low income and minority populations. That doesn't have to be that way but it's because this disproportionately affects communities that lack access to services already. And so what is the political consequence in the era of COVID to kicking that minimum wage increase down the road?
Jay Speer
Well, I think it's a mistake. I mean, this whole pandemic is low income folks are already bearing the brunt of all of this. They're the folks that are can't pay the rent, can't pay the utilities, they lost their low income, their low wage jobs. And I think it's a mistake to put this on them. And they already carry way too much of the brunt of this. If you look at the Stock Market, which is going through the roof, wealthy people are getting richer and the poor and taking the brunt of this. And I don't think, that I disagree with that decision to put it off.
Dana Wiggins
Absolutely. I don't think that it will serve us well. I don't think it will serve communities around the Commonwealth well, by putting that off. I also think that the Legislature should feel ashamed for not passing Paid Sick Leave, knowing that a pandemic was coming and not supporting Paid Sick Leave, particularly for low wage workers. I think it's shameful.
Thomas Bowman
Well, guys, thank you so much. Jay Speer, Dana Wiggins, thank you so much for joining us on Transition Virginia. Please reach out with a question at TransitionVApodcast@gmail.com and find us on iTunes, Spotify or anywhere else you get your podcasts and leave us a five star review. You can also find us on the web at www.transitionvirginia.com.
