Virginia offers short-term loans to state employees

Governor starts new program

The State of Virginia has started a new program for its employees. In a way, I have to commend them for not being just another entity that trashes payday loans and offers no alternative.

However, the state's short-term lending program won't replace payday loans. The point of no credit check payday loans and other types of short-term loans and private lenders is that anyone can get them. Now, the state's 100,000 employees have access to emergency funding, but the program doesn't help the rest of the state's residents.

Setting an example

After the governor's program begins, government employees in Virginia will be able to get the cheapest payday loans of anyone in the state. Government employees who belong to the state's credit union can get small cash loans of up to $500. That's about as specific as the information gets at this point, though. The Richmond Times-Dispatch says:

"Gov. Timothy M. Kaine today is expected to announce a short-term lending program for state employees that would allow workers to take out low interest loans of up to $500 to meet emergency needs.

"Borrowers would have up to six months to satisfy the debt, which would be repaid through payroll deductions."

“It’s a way to help out people who need money in a hurry so they don’t have to go to outside lenders,” said Kaine press secretary Gordon Hickey. The state has about 100,000 employees.

“The governor hopes this will be a model for private companies to use for their employees,” Hickey said.

"Details on the interest rate and the number of loans employees are eligible to take out per year will be released today at a Kaine news conference to roll out the program.

"But Hickey said the borrowing would come at “a considerably lower rate than they could get anywhere else."

Not for everyone

This new program follows the state placing new restrictions on the payday lending business this month. I believe this program will be very helpful for people who are eligible, but the rest of the residents in Virginia will still need to have options when they run into financial emergencies.

The press secretary, Hickey, said he hopes it will be a model for private companies to use for their employees. The truth is, many places already do allow their employees cash advances. Most employers don't charge any interest or fees at all to give their employees cash advances.

Details on new laws

The Richmond Times-Dispatch explained the new restrictions placed on payday lenders in Virginia:

"Under the assembly’s most recent crackdown on payday lending, which took effect July 1, lenders will be required to choose between offering payday loans, whose fees are fixed, and open-ended loans, which can carry sky’s-the-limit interest rates. Lenders that get out of the payday business lose their licenses to offer such loans in Virginia for a decade.

"Meanwhile, as the national recession continues, banks and other traditional lending institutions have been reluctant to extend credit and typically do not provide the smaller, emergency loans available under the program."