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Tiny Virginia Town Stands Up To Payday Lenders

Town steps in when state legislature feared to tread

By Mark Huffman
ConsumerAffairs.com

March 19, 2008
The town council of tiny Kilmarnock, Virginia, has done what the mighty Virginia General Assembly could or would not do -- banned payday lenders.

The Virginia legislature, after grappling with the issue of payday loans, came up with a compromise measure last week that would cap interest rates at 36 percent, lengthen the time that borrowers have to repay a payday loan, limit how many loans borrowers can get each year, and prevent lenders from making loans to members of the armed forces.

However, much to critics' chagrin, the measure allows payday lenders to keep in place some of the more objectionable "loan fees" that they say keep borrowers hooked on high-priced credit. The measure awaits the signature of Gov. Tim Kaine (D).

But in Kilmarnock, population 1,244, members of the town council voted 4-2 to keep payday lenders from setting up shop in the community. The vote came after a lengthy public hearing in which townspeople jammed the tiny council chambers to overwhelmingly express their disapproval.

The town's commercial zoning allows for banks, but had created a separate category for "small lending businesses." That category is currently not allowed under the ordinance and speaker after speaker urged the council to keep it that way. Many of the opponents were local clergy, or otherwise represented churches in the community.

"I can assure you that the clergy represented here today reflect a wide range of the political spectrum, but on this issue we are united," said the Rev. Megan Holloway, Assistant Rector at Kilmarnock's Grace Episcopal Church.

The sole proponent of amending the zoning was Randy Phelps, manager of the Advance America lending store in a nearby town. His company, whose Web site says it operates 2,800 stores nationwide, was seeking to open a cash advance store in a new strip shopping center, part of the town's new Wal-Mart complex.

"We're not evil people," Phelps protested to the council. "We provide a needed service."

But many, including Ward Scull, of Newport News, Virginia, disagreed. Skull, founder of a group called Virginians Against Payday Lending, had failed in his attempt to convince the Virginia legislature to ban payday loans in the state. He found a more receptive audience in this small Virginia town.

"Simply put, these are usurious loans that put people in a debt trap they can't get out of," Scull said. Payday lenders have spent millions of dollars to advertise and lobby against reform over the past year and given a reported $310,000 to state legislators' campaigns. But that spending did them little good in Kilmarnock, a picturesque village that was settled in the mid-1600s. The town is named for Kilmarnock, Scotland and occupies all of 2.69 square miles.

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