Predatory Loans in Virginia

Some lenders charge very high fees and interest rates that can trap you in debt. These are called predatory loans. They often target people who need money quickly and may not qualify for a regular bank loan.

Virginia has passed laws to protect you. This page explains what those protections are and what to watch out for.

What is a predatory loan? 

A predatory loan is a loan with unfair or very expensive terms. The lender may hide the true cost of the loan, charge fees that are hard to understand, or use tactics that pressure you to borrow more than you need.

The most common examples in Virginia are payday loans and car title loans. Both are short-term loans that can cost far more than they first appear.

What protections do I have in Virginia? 

Virginia passed the Fairness in Lending Act in 2020. This law made two important changes:

• It capped how much lenders can charge for small-dollar loans.
• It added consumer protections to prevent lenders from using abusive tactics.

Before this law, some lenders charged annual percentage rates (APRs) — the yearly cost of a loan — between 300% and 5,000%. Those extreme rates are not legal anymore in Virginia.

The law also requires lenders to be licensed to offer these types of loans in Virginia. Before you borrow, you can check with the Virginia State Corporation Commission whether a lender has a valid Virginia license.

What are the dangers of payday loans? 

Payday loans are short-term loans meant to be paid back on your next payday. They are easy to get but expensive to repay. Even under Virginia's new rules, the fees and interest can add up fast if you cannot pay the full amount back on time.

Some lenders still try to get around Virginia's protections by operating online or claiming to be based in another state. If a lender is not licensed in Virginia, that is a warning sign.

What are the dangers of car title loans? 

A car title loan uses your car as collateral, meaning you are pledging your car to guarantee the loan. If you fall behind on payments, the lender can repossess (take back) your car. Losing your car can make it much harder to get to work or take care of your family.

Before taking out a car title loan, consider whether you could lose your vehicle if something goes wrong. That risk is serious.

Does Virginia law protect me if the lender is based in another state? 

Virginia law is intended to apply to all lenders even if they are based outside Virginia. However, some lenders claim the loans are made by out of state banks who claim they do not have to follow Virginia law.  

A free attorney through Legal Aid can help you figure out your options. Call 866-LEGLAID (866-534-5243) or visit virginialawhelp.org/get-legal-help to find help near you.

Are there safer alternatives to high-cost loans? 

Yes. Before taking out a high-cost loan, consider these options:

• Contact the company you owe money to and ask for a payment plan or more time to pay. Many creditors will work with you if you reach out before falling behind.
• Pay what you can, even if it is not the full amount. A partial payment is often better than taking out a costly loan to cover the rest.
• Ask a nonprofit credit counselor for help. They can look at your full financial picture and suggest options you may not have considered. Find a nonprofit counselor through the National Foundation for Credit Counseling at nfcc.org or by calling 800-388-2227.
• A high cost loan might solve your immediate problem but will likely cause you many more problems soon thereafter.

What if I already have a high-cost loan or want to report a lender? 

If you believe a lender has broken Virginia's lending laws, you can file a complaint with the Virginia State Corporation Commission or the Virginia Office of the Attorney General.

Where can I get free legal help in Virginia? 

If you need a lawyer but cannot afford one, free help may be available. Call 866-LEGLAID (866-534-5243) or visit virginialawhelp.org/get-legal-help to find a legal aid office near you.