Virginia’s credit markets could disappear if Virginia Governor Glenn Youngkin — an oft-cited likely contender for the 2028 GOP presidential nomination — signs a bill instituting extremely tight caps on Annual Percentage Rates (APRs) applicable to online loans.

Proposed by Sen. Lamont Bagby (D-Henrico), SB 1252 places a ceiling of 12 percent APR on this type of credit. That’s about half the current average credit card APR nationwide.

This proposal, by the way, is to the left of that put forward by noted Democratic Socialist Rep. Alexandria Ocasio-Cortez (D-NY), also known as “AOC.” Youngkin has generally been regarded as a more moderate-to-limited government proponent, but his action with regard to the bill could change that.

AOC proposed a 15 percent APR cap on credit card debt back in 2019. It didn’t go anywhere in Congress, but Bagby apparently picked up the torch, moved to the left of even this left-wing firebrand, and somehow conjured up a more radical proposal.

From a policy standpoint, APR caps do little to nothing to help low-income borrowers. They actually help the so-called loan sharks that figures like AOC and Bagby supposedly wish to put out of business. Writing of the period in American history when a need for short-term, small-dollar borrowing first emerged but strict usury caps were in place, “Prohibitively low usury ceilings made it impossible for working families to borrow the money they needed from legitimate lenders,” averred George Mason University Professor Todd Zywicki in 2019. Per Zywicki, “Illegal loan sharks filled the void.”

Virginia Dem Sen. Sponsors Bill to Cap Debt Interest - Which Could Eliminate Options for Many Consumers

The Trouble With Interest Rate Caps and Black Markets

The same thing will happen in Virginia now if Bagby’s bill makes it onto the books. The bottom line is that it is risky for lenders to offer money to borrowers with no or weaker credit scores in Virginia—but those borrowers still need occasional finance to cover emergency expenses. Not everyone can borrow from a friend or a family member. Not everyone uses or is even eligible for a credit card.

But a big problem with the bill — outside of its radical cap — is that it’s also a giveaway to trial lawyers, particularly those who engage in class action lawsuits. Once attorneys spot a chance to sue, they will, particularly regarding lower interest rate caps. It generates the chance of a large class action suit, plus a settlement when a company doesn’t want to go to trial. Virginia’s existing lending laws have already been a boon to the plaintiff bar.

Bagby’s adherence to the whims of this category of lawyers shouldn’t be surprising. After all, he’s a Business Development Executive at one of the larger personal injury law firms in the mid-Atlantic. This gives him some skin in the game on the success of the legal field—and if his bill passes, potentially a whole new line of business to develop.

Even if that business never comes through, though, SB 1252 sure looks like an opportunity to repay his donors. The sixth largest donor to his Senate Committee is the Virginia Trial Lawyers Association, according to records from the Virginia Public Access Project. The Virginia Trial Lawyers Association was also Bagby’s sixth biggest donor to his Delegate Committee, which funneled money into his Senate campaign. Among his top twenty donors is also the Allen, Allen, Allen & Allen law group. In total, these donors have given Bagby’s campaigns close to $50,000.

Bagby may be counting on Republicans who have lined up with him to obscure these facts. The reason this bill now sits on Gov. Youngkin’s desk is in part because several Republican Senators in Richmond also voted for it, despite Minority Leader Sen. Ryan McDougle’s opposition.

So much for the free market and consumer choice — unless, of course, Youngkin exercises his veto power. It would certainly be odd to see a right-of-center governor who is still rumored to have presidential ambitions get to the left of a figure like AOC, who remains one of the least popular figures in America with the GOP base.

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