Are Internet Loans in Virginia Legal?

By: Sharen Sellgren

In short, it depends on the type of loan (personal vs. business) and the loan terms. Personal loans are typically unsecured, meaning you do not have to put up any collateral and there is no down payment like home and auto loans require – it’s up to your creditworthiness to secure the loan. Not all internet loans are improper, but all personal loans made on the internet that violate the 12% APR rule are void and unenforceable, as are internet payday loans and many open-end internet loans.

12% Annual Percentage Rate (APR) Rule

Unless statutorily exempt under Virginia Code § 6.2-303, no contract shall be made for the payment of interest on a loan at a rate that exceeds 12% a year.  One of the exemptions is for licensed Virginia consumer finance companies. (You can find the other exemptions listed in section B of Virginia code § 6.2-303.)  A consumer finance company is defined as “a person engaged in the business of making loans to individuals for personal, family, household, or other nonbusiness purposes.” Virginia Code § 6.2-1500.  These companies may charge more than 12% interest but there are no internet lenders licensed as a consumer finance company in Virginia, so any companies offering personal loans online are acting improperly.

Virginia Code § 6.2-1541 further regulates that if a lender makes a non-business loan without a Consumer Finance License and makes a loan for more than 12% APR, the contract is void and the lender is not entitled to collect any principal, interest or charges whatsoever on the loan (and the borrower is entitled to any principal or interest already paid on the loan). In interpreting the Virginia Code, the court in Virginia v. Cash N A Flash determined in 2010, that because the lender, Cash N A Flash, had not obtained a Consumer Finance License and because it charged more than a 12% APR, that a loan it provided was null and void and the court also granted a repayment of the interest and principal back to the borrower.

Internet Payday Loans, Installment Loans, and Open-End Loans

Internet Payday Loans
A payday loan, defined under Virginia Code § 6.2-1800, is a small, short-maturity loan based on the security of some income payable to you (not based on income tax refunds).  These loans are permissible, but no internet lenders have a payday loan license, so you cannot get a payday loan online. It is a Class 2 misdemeanor to make such a loan without a license.

Installment Loans
Installment loans are loans where the loan repayment is over a set period of time (weekly or monthly payments, for example). Internet installment loans don’t meet any of the statutory exceptions listed in subsection B of Virginia code § 6.2-303, so they are null and void if they charge more than 12% APR.

Open-End Loans
Open-end loans are those that do not have a set date to finish paying off the loan (similar to a credit card: as you pay it back, you can take out more money on the “credit line”).  Under Virginia Code § 6.2-312, you have at least 25 days to repay the loan in full without incurring any charges or fees.  There are some internet lenders pretending to offer open-end loans but they either do not meet the definition of an open-end loan under Virginia Code § 6.2-300, which is defined as “consumer credit extended by a creditor under a plan in which: (i) the creditor reasonably contemplates repeated transactions; (ii) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (iii) the amount of credit that may be extended to the consumer during the term of the plan, up to any limit set by the creditor, is generally made available to the extent that any outstanding balance is repaid,” or they do not have the required 25-day grace period required by Virginia Code § 6.2-312.  Finally, as noted above, if the interest charged exceeds 12% APR, the loan is null and void.

Different Laws in Different States?

Sometimes, a loan contract will contain a clause that applies a different state’s law to the loan. Even if you have agreed to this provision in the contract, if the lender does not have a Virginia license to make consumer loans with an interest rate greater than 12% APR, then the loan is void and the contract cannot be enforced.

Internet loans are easily available and well-marketed but there are only a few safeguards in place in Virginia to protect consumers.  All loans made to Virginia residents over the internet for more than 12% APR, are unenforceable loans.  All internet payday loans are illegal.  And any open-end loan (that is not statutorily-exempt), must provide borrowers a 25-day grace period without any fees or charges. Make sure you are aware of these protections when entering into an internet loan. If you think you entered into an invalid loan and need assistance, please contact us.

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56 Responses
  1. Stupidly took out a high interest loan from OppsLoans in VA. The interest rate is 159%. Everything I read seems to point to this loan may not be legal in VA. They have a disclaimer that they deal directly in VA but I didn’t find their name on the list of those lenders licensed in VA. How can I find out if this loan is legal? I reached out to the AG but their only response was they can’t provide legal advice. In doing a little research it appears Opps was sued a few years ago for offering open ended loans – but the insane interest rate wasn’t addressed. Any thoughts on the legality of this loan?

  2. I also have been threatened with a judgement if I do not accept settlement offer ot pay in full by April 7.2021. I am going to ignore and if they try coming after me, it will go to legal aide. Nhcash APR is in violation of VA law for open end line of credit. Also, they are bogus!! My loan was deposited in my account before signing a contract. Also, throughout the months the payments were very inaccurate. Last, the contract they send showing processing by what suppose to be my electronic signature. It is either they tried to get electronic signature before I accepted the loan or fraudulently forced it. Someone did not know what they were doing. I even had someone to call me from a mobile phone 1 year ago trying to pretend as if I was going to be issued with a summons from court. Threaten is also a violation.

  3. Any information/suggestions about dealing with online line od credit with 24/7 Advance Financial? Gog behind on payments, asked them to settle for closing the account so that no more interest would be charged and I would pay remaining balance. (Of course I had already paid back at least 4 times what I borrowed.) They refused to close account, continued adding interest, withdrew first stimulus payment the day it hit my account. Sent them an email revoking their permission to access my account and they haven’t made any more withdrawals, but now I’ve got a letter from a lawyer saying the case was turned over to them for collections. Any suggestions?

  4. I have had a payday loan through NHCash back in 2017 I closed my bank account because they would constantly take out too much money every time I got paid. They charged a lot in interest rates, way more than 12% and they contacted my mother and my father leaving a voicemail accusing me of wire fraud which scared me so I am paying the settlement agreement of $450. I was young and dumb and took out a payday loan without knowing what it was back in 2017.

    Could they have had a judgment out for me like they threatened they were going to do if I didn’t comply?

  5. I have a eviction on my rental history from my previous landlord but it should be there because I paid the rent. He says he sent a letter to the court house letting them know so that the eviction would be removed. I never received an eviction papers I own the mobile home I wa as only paying lot rent. And I moved out because the home was no longer in a condition where my children would be safe. So I did what was best and moved out and I also let the landlord know. I am trying to get a home for me and my children and this eviction is holding me back. How can I get this eviction removed?

  6. I have an online installment loan with Balance Credit of Utah and I live in Virginia. After reading this I believe my loan is not legal. The yearly interest rate is 241%. I looked up the Consumer Finance Licensees in Virginia and do not see them listed. There is indeed language stated in my contract that they’re governed by Utah law. Am I understanding correctly that this contract is actually unenforceable?

  7. Mr. Richardson, in regards to Netcredit loans. I am being charged an APR of 99%. They state that Utah law or something about arbitration trumps Virginia law. Since my APR is more than 12% as dictated by Virginia law, am I obliged to continue to make payments to them and if not, can they still sue me in court? Any updated information regarding Netcredit is appreciated.

  8. How can I get out of this cash net loan? 299% is a rip-off. I’ve already paid thousands of dollars on a 1200 dollar loan and still owe 3000. They take 900 a month and only 160 goes towards my loan. Can I stop payment or close my account and open a new one?

      1. Steven, my son (who lif a life long resident of Virginia) is a victim of Cashnet USA. His loan, as stated is 266%. It appears that the Virginia law is clear “no loan over 12% APR”. You have replied several times “it really depends on the specific terms of the loan and how it was obtained”. Can you give some specifics of details and obtainment that might be outside the law.

  9. I have a loan with CashnetUSA and Netcredit. I have recently become sick and working with on a shorter paycheck and tried getting them both to work out some sort of agreement granted I have been trying to pay these loans down but the interest is killer. However they are unwilling to budge. If these two companies are not considered legal I really at this point have no choice but to close my account and open a new account. Are they considered not legal in VA?

  10. I am still paying 64.99% interest on that Net Credit Loan which was for $8000. I know that this is still in the Courts . Does anyone have updated information about Net Credit? I tried to get them to lower this rate but they won’t

  11. I took out a loan from Nhcash back in 2016 for $445 alomg with being billed a $100 origination fee. Like the person in a post not too far from mine, they do say on their site they’re licensed in Virginia but their interest rate is 36%. I have paid these people more than double of the amount I borrowed and I do not want to pay them anything else. Cam anyone truly find out if they are in the right to do this and show some proof so that I can send it to them so they too can see it. I don’t need court threats so I’m trying to do this the smart way.

  12. I needed some money to help pay for treatment of my wife’s illness and made the mistake of taking a “line of credit” from Onward Credit, an online lender that has a 359.1% Interest rate. I also ended another one with Opportunity (Opp) Loans with a 160% rate and have been struggling ever since. I they both kept raising my credit limit and I got caught in a horrible loop of using one to pay the other and vice versa. I have had to really work hard to get Onward almost paid off and got it down to $382 and they sent me a strange offer out of the blue to “settle” my account by offering a single payment of $265 and the account would be paid in full. I thought this was fishy so I started doing some homework and decided that they were probably not legal to lend to a Virginia resident and so sent them an email stating that I believed that the loan wasn’t legal and removed all permission for them to debit my accounts and that I was due a refund of all fees and interest paid above the principle amount over the past 2 years which equaled about $7368 but would accept $6000 as I understood that they are a business and that they may have made a mistake. I cited the Open End loans from the SCC site. They replied that they had forgiven the remainder of the debt and closed the account. I told them that was not enough that I wanted the refund or I would file complaint with the Att. General for Virginia and the FTC. They quickly offered a $1000 settlement and haven’t changed from there, adamantly stating that they are in full compliance. At one point I told them that if I had to obtain legal counsel that as soon as I pay a retainer that I would no further try to resolve this between us. They then stated that they turned this over to their legal counsel and that I would be hearing from them in a few days. Then, 2 days later, offered me $1000 to settle again? is that normal? why would a legitimate business even offer to settle an account that is almost paid off let alone offer $1000 to settle in addition to closing the account? If this is not legal, I want to do something about it. Predatory lending is awful and has caused me and my wife to struggle terribly. Thank you for listening to my long winded speech

  13. I have a payday loan with CashNetUSA with a 299% interest rate. I pay about 375 per month and only 150 goes to my principle. I looked on their website for contact info for Virginia’s regulatory agencies, and there’s nothing. Also, they have a “link” that’s supposed to go to their licensing and registration in each state, and it just goes back to their definitions of loan terms page. Super fishy, but I’m concerned whether this is legal at all. They call it a “line of credit” loan. Any advice or additional info?

    1. I would like to know the answer to Sarah’s question also. I have a payday loan with AF also and the rate is also 360%! I am in the process of rebuilding my credit and CAN NOT have afford to have them sell it to a collection agency and go on my credit report. TIA

  14. I have loan from Netcredit showing delinquent on my credit report. It is the only delinquency I have. The interest rate was well over 50%, yes I was desperate and I paid on it for a year but the balance kept going up and up. Is is possible to dispute and get this off of my credit report?

    1. Report to the credit bureau and let them know that Netcredit is in litiagration and and that all info should be reported to the AG’s office in VA. I reported them and it was removed off of both my credit reports.

      1. Wolfie; I’m battling with net credit right now. Principle has long been paid off but when I learned that they really AREN’T legal in VA, I just stopped paying them. But, they keep reporting to the credit agencies. I filed a dispute with Experian explaining that the loan is illegal in VA, they had no license in VA to do business, and were currently in litigation.and it took a month but they removed it. Then, mysteriously, it reappeared. They said they had “new information”. I’m now going to report both Experian and Net Credit to the CFPB b/c I’ve had it with the credit bureaus and Net Credit.

  15. I received an online payday loan I’ve made 1 payment and it seems nothing has decreased in amount owed. After looking into further the APR is 365% should I pay this

  16. Hello. I have an open-end loan through NHCash.com. On their website, it says they are licensed in Virginia and have an interest rate of 35.99% a year. I haven’t paid on this loan in three years, and a collector contacted a couple weeks ago threatening me with fraud. I reluctantly gave in, but I reported the collector to the CFPB. They ended up giving my money back and said they were sending my account back to the original creditor. On my credit report, it says NHCash.com sold my debt to another lender. Should I be worried about gettting sued? Is NHCash.com legal in Virginia?

      1. I also have been threatened with a judgememt if I do not accept settlement offer ot pay in full by April 7.2021. I am going to ignore and if they try coming after me, it will go to legal aide. Nhcash APR is in violation of VA law for open end linecof credit. Also, they are bogus!! My loan was deposited in my account before signing a contract. Also, throughout the months the payments were very inaccurate. Last, the contract they send showing processing by what suppose to be my electronic signature. It is either they tried to get electronic signature before I accepted the loan or fraudulently forced it. Someone did not know what they were doing. I even had someone to call me from aobile phone 1 year ago trying to pretend as if I was going to be issued with a summons from court. Threaten is also a violation.

  17. I was contacted by an attorney stating that I was getting sued for an online payday loan back in 2010. I was told it was a civil lawsuit with one of the charges being theft by deception and one of the other two being check fraud. Can they do this?

  18. WHAT ABOUT MOBILOANS AND ELASTIC LINE OF CREDIT? I LIVE IN VA AND HAVE FALLEN BEHIND IN PAYMENTS. ARE THESE INSTALLMENT LOANS LEGAL IN VA? I HAD NO IDEA SOME OF THESE ONLINE PLACES ARE NOT LEGAL HERE IN VA. I’M SCARED AT WHAT MIGHT HAPPEN IF I CAN’T PAY THEM BACK.:-(

  19. I live in Virginia have a loan with netcredit had income reduced tried to get these people to do some kind of hardship program or payment arrangements and won’t do so. they are charging me 64.99 percent interest and have had this loan since feb of 2017. I read that they were being sued due to having no license in this state and charging more than what the state allows. Anyone know who i can contact about this situation about Net credit

    1. close your bank account and open another. there isn’t a thing they can do. I took out like $10,000 of internet payday loans from various lenders, then transferred the money out and closed the account. they never got a penny from me. It’s been about six years now, and they still call on occasion and I just laugh at them. Tell them they should have known better than to give out illegal loans to a Virginia resident. Then I tell them that I will give their information to the Attorney General for preying on Virginia residents if they keep it up. Eventually they stop calling. There is one of the original eight companies that still calls, but screw them.

  20. I have a loan with mobiloans and they told me they have been trying to contact me regarding it. ( which is not true). I spoke to representative stated that i have to give my employment information if i don’t pay it they can garnish my wages. I was told this a tribal loan i need some help and assistants. Please help, let know what to do.

  21. 1500$ Internet loan
    Have paid back 4000$ and still owe 900$. Now I hear the loan was illegal from the get go because the APR is over 12%. Is this correct??

  22. i live in virginia and have a large loan with them. in fact i have several online ones and am struggling financially. maxlend just waived my last 3 payments siting they do not extend loans in VA which is good now but upsetting that they got a ton of money out of me…..i need help and im scared

  23. Well any newbie who needs internet loan must read those guidelines before taking an internet loan.It can help them to understand at what percent the charges will be more and in under what days there will be no interest rate chargeable !!

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About the Author

Steven Krieger and guests (lawyers and non-lawyers) will periodically post about topics relevant to his firm and practice areas. Your comments and feedback are always welcome. 

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