ROANOKE TIMES 

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, February 25, 1994                   TAG: 9402250200
SECTION: VIRGINIA                    PAGE: B-5   EDITION: METRO 
SOURCE: 
DATELINE: RICHMOND                                LENGTH: Short

COMPROMISE IN WORKS ON INTEREST-RATE CAPS BY STAFF REPORT

The State Corporation Commission could cap interest rates charged by consumer loan companies if it finds Virginians are being gouged after the current caps written into state law are removed, under a compromise plan to be presented to a House committee next week.

The behind-the-scenes work on a bill to abolish the caps, sponsored by Sen. Richard Holland, D-Windsor, delayed a planned vote Thursday by the House Corporations, Insurance and Banking Committee.

Holland's bill also would increase the amount that companies can loan in a single transaction from $3,500 to $6,000 and would stretch payments from 49 months to 60 months.

While Holland said the bill would create a "free-market" atmosphere among consumer loan companies that would result in lower interest rates for customers, consumer advocates have decried the measure as legalizing loan-sharking. The small loan firms already can charge up to 30.72 percent on loans up to $800; 22.8 percent on loan balances between $801 and $2,000; and 16.8 percent on balances between $2,001 and $3,500.

Del. Bernard Cohen, D-Alexandria, said Thursday the proposed compromise would remove the cap but would give the SCC authority to monitor loan practices and reimpose limits should abuses be found after a hearing.

"The fact that a compromise is being worked on is a clear indication that this committee is uncomfortable with taking the lid off interest rates," said Jean Ann Fox of the Virginia Citizens Consumer Council.

Fox argued that "the only reason to remove the cap is to allow the loan companies to make more money. The commission would have the ability to reinstate the limits, but it's after the fact."

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