Maryland Legal Alert for Financial Services
Virginia’s General Assembly Passes SB 1252, Potentially Reshaping Application of Usury Laws
Virginia’s Senate Bill 1252, recently passed by the House and Senate, introduces changes to the state’s usury laws, particularly expanding the anti-evasion provisions to uphold the 12% annual interest rate cap. The Bill seeks to further prohibit deceptive lending practices. This includes disguising loans as sale-leaseback transactions, misrepresenting loan proceeds as cash rebates, and facilitating high-interest loans through any medium—whether by mail, telephone, internet, or electronic means—regardless of the lender’s location.
SB 1252 also broadens the definition of loans and introduces new restrictions on earned wage access services, categorizing certain cash advances as loans when repayment is made automatically. While the legislation seeks to enhance transparency and mitigate predatory lending practices, it raises concerns regarding potential restrictions on credit access for high-risk borrowers by banks and fintech companies. Consequently, consumers may encounter a reduction in lending options and an increase in borrowing costs as financial institutions adjust to these more stringent regulations. The overall impact of the Bill (if it becomes effective), however, remains uncertain as it awaits the Governor's decision to either sign or veto the legislation. Financial institutions involved in partnerships with fintech providers offering loans in Virginia should carefully consider the reach of the Bill.
For more information, contact Christopher R. Rahl or Tamia J. Morris.