You asked for summaries of payday lending laws in Georgia and Virginia, especially as they relate to military personnel.

According to an October 2000 report by the National Consumer Law Center,

“[P]ayday loans” are small, unsecured consumer loans that require repayment within a relatively short time period. The consumer gives the lender a personal check and receives cash less the interest and fees charged by the lender. The check is then held for a scheduled period of time, generally until the consumer’s next payday, or a one- or two-week period. When repayment is due, the consumer may redeem the check by paying the face amount, allow the check to be cashed or refinance the loan by paying another fee. If the consumer is unable to redeem the check or lacks sufficient funds in his checking account, he must find another way to repay the loan or possibly be subject to a civil bad check penalty.

(A copy of the report is enclosed. )

GEORGIA

In 2002 the Georgia attorney general issued an opinion that payday lending was illegal. In 2004, the legislature passed SB 157, which required that payday lenders be licensed under the state’s industrial loan law and comply with this law. Among other things, industrial loans are limited to 5% interest per month.

The legislation established a variety of mechanisms to enforce the prohibition against illegal payday lending. Among other things, the legislation:

1. made violations of the payday lending law a misdemeanor, subject to a fine of up to $ 5,000 for a first offense and a fine of up to $ 10,000 and imprisonment for up to five years for a subsequent offense;

2. declared illegal payday loans void and barred lenders from collecting the indebtedness;

3. allowed violations of the law to be prosecuted under the state’s racketeer influenced corrupt organization (RICO) law;

4. subjected the proceeds of illegal loans to a 50% tax;

5. allowed borrowers to sue for three times the amount of all interest and charges for such loans, plus attorneys’ fees and court costs; and

6. authorized class action suits against lenders who violated the law.

With regard to loans to members of the military and their spouses, the legislation prohibited lenders from:

1. garnishing any military wages or salary;

2. conducting collection activities against a borrower or his spouse when the borrower is a service member who is deployed to a combat or combat support posting, for the term of the deployment; or

3. contacting the borrower’s commanding officer in an effort to collect on a loan.

The lender is bound by a repayment agreement that he enters into with military or other third-party counselors with respect to such borrowers. He must also honor any statement or proclamation from a military base commander that a specified payday lending location is off limits to members of the military or their spouses. The lender must make a written disclosure to a borrower who is a member of the military or military spouse regarding these provisions.

VIRGINIA

The law requires that lenders be licensed by the Department of Financial Institutions in order to make payday loans to state residents, whether they are located in Virginia. A payday loan is a small, short maturity loan on the security of a check or the assignment of interest on a bank account or income payable to the loan recipient. An income tax refund loan is not considered a payday loan. Payday loans must be evidenced by a written agreement that specifies the principal, interest rate, and loan fee, among other things.

The law restricts the types of activities that a payday lender can engage in. With regard to loans to service members or their spouses, the lender may not:

1. garnish any military wages or salary;

2. conduct collection activities against a borrower or his spouse when the borrower is (a) a service member who is deployed to a combat or combat support posting and (b) a member of the reserves or National guard who has called to active duty, for the period of the deployment of active duty service;

3. contact the borrower’s commanding officer or anyone in his chain of command in an effort to collect on a loan; and

4. enter into a payday loan with a member of the armed forces if a military base commander has declared that a specific location of the lender’s business is off limits to military personnel.

In addition, the lender is bound by a repayment agreement that he enters into with military or other third-party counselors with respect to such borrowers (Va. Code. Ann. Sec. 1-444 et seq).

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