April 22 (Bloomberg) -- Companies that extend high-interest loans to retirees in return for a share of their pensions will face stricter oversight in Vermont that may make it impossible for them to operate.
Governor Peter Shumlin today is to sign a law requiring lenders to be licensed by the state and comply with interest limits and other banking regulations. The measure is the first by a state aimed at reining in such loans, according to Vermont officials.
Some lenders, who typically operate on the Internet, sometimes charge interest exceeding 100 percent a year. Shumlin, a 58-year-old Democrat, said the state doesn’t anticipate that any companies would qualify as licensed lenders, so the legislation will effectively halt such loans.
“Predatory lending that targets people’s retirement and pensions is a growing problem across the country,” Shumlin said in a statement. “This bill allows us to get ahead of the problem before Vermonters suffer and hopefully will be an inspiration to other states to stamp out this predatory practice.”
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