SB 1252 and the Balance Between Consumer Protection and Access to Credit

I am writing to express my concerns about SB 1252, which proposes a 12% cap on interest rates for loans in Virginia. While I understand the bill’s intent to protect consumers from predatory lending, I believe it is crucial to strike a balance that ensures access to credit for those who need it most, especially underserved communities. Many Virginians, particularly low-income individuals and those with limited credit histories, rely on alternative lenders, such as credit unions, fintech companies, and community banks. These lenders provide essential financial services to those who cannot access traditional loans. However, the 12% interest rate cap could limit these services, especially for subprime borrowers who rely on higher interest rates to offset the risk involved in lending to them. In states like Illinois, where similar interest rate caps were introduced, there was a 44% drop in loan availability for subprime borrowers, with many consumers forced to turn to more expensive, potentially predatory options. We must avoid similar outcomes in Virginia, as this would leave vulnerable consumers without access to responsible credit and trap them in cycles of debt. While it is important to protect consumers from excessively high-interest rates, the bill risks going too far in limiting access to credit. Alternative lenders are often the only option for individuals who do not qualify for traditional loans, and restricting their ability to charge higher interest rates could inadvertently harm the very people the bill aims to protect. I urge you to consider amending SB 1252 to create a balance that protects consumers from predatory lending practices while maintaining access to credit for those who rely on non-traditional lenders. We can achieve this by adjusting the interest rate cap to ensure that it does not unnecessarily limit lending options for subprime borrowers. Additionally, expanding financial literacy programs could help consumers better navigate credit options and understand loan terms. Thank you for your time and attention to this important issue. I hope you will consider the impact of this bill on access to credit for underserved Virginians and work toward a solution that supports both consumer protection and financial inclusion.