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

DATE: WEDNESDAY, October 19, 1994                   TAG: 9410190056
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: RICHMOND                                  LENGTH: Medium

HOUSE COMMITTEE AGREES TO DEREGULATE SOME LOANS

Consumer finance companies will be able to make bigger loans and charge higher interest rates if a bill endorsed Tuesday by a House of Delegates committee becomes law.

The Corporations, Insurance and Banking Committee approved a bill allowing finance companies to make loans of up to $6,000. Interest on loans up to $2,500 would be capped at 36 percent. Larger loans would be unregulated.

Finance companies now can loan up to $3,500. Interest rates, combined with a 2 percent administrative fee, can range from 34.5 percent for loans up to $800 to 28.25 percent for the maximum loan.

The General Assembly will consider the bill, a carryover from the 1994 session, in January.

The bill by Sen. Richard Holland, D-Windsor, was supported by the small-loan industry and opposed by consumer advocates.

Interest rates are regulated by the State Corporation Commission, which reviews the market every two years. Jeff D. Smith, president of the Virginia Financial Services Association, said the system is slow to respond to the changing financial climate.

He said deregulation would allow competition to control rates, which could actually decline. He said the change is needed ``so the borrowers who come to finance companies will continue to have a reasonable source of funds at reasonable rates.''

Del. Bernard Cohen, D-Alexandria, disagreed. He said the bill ``creates a window for abuse between $2,501 and $6,000,'' and he predicted some lenders would jack up interest rates to triple digits.

David Parcell, an economist with the C.W. Amos consulting firm, said finance companies already are earning higher profits than banks, which make less risky loans at lower interest rates.

``The industry doesn't need higher rates,'' he said. ``They have an adequate profit level now.''

David Rubenstein, director of the Virginia Poverty Law Center, said low-income, credit-starved consumers who ``are not welcome in banks'' would be charged excessive interest rates.