In a decision of far-reaching importance, a Virginia trial court recently ruled – twice – that small loan companies are exempt from regulation under the Virginia Consumer Protection Act (“VCPA”).

In its original ruling, handed down in late January, the Circuit Court for the City of Richmond rejected the position of the Virginia Attorney General’s Office, which argued that the statutory exemption only applies to licensed small loan companies.  The Court explained that it was “bound by the plain meaning of the language” and declined to add the word “licensed” to the exemption provided to “small loan companies” by Virginia Code § 59.1-199 (D).

The Court also rejected the Attorney General’s argument that the exemption only applies to small loan companies that are “regulated and supervised by the State Corporation Commission or a comparable federal regulating body.”  That additional language, while appearing in the statute, comes at the end of a long list of exempt entities.  Applying the “rule of the last antecedent,” the Court held that the qualifying phrase applies only to “insurance companies,” the type of entity that directly precedes the phrase.

Although Virginia law does not define “small loan company,” the Court held that the term means “companies, such as the one in the present case, which issue small loans.”  Court papers showed that the company at issue issued lines of credit from $250 to $1,500.

The second ruling came late last month when the Court denied the Attorney General’s motion for reconsideration, thus reinforcing the precedential value of the decision.

Companies that are subject to the VCPA can be exposed to substantial penalties for a wide variety of broadly-defined violations.  Thus, the decision that small loan companies are exempt is expected to have a major impact on the regulatory landscape.

The Court left in place the Attorney General’s claim that the company is subject to other Virginia consumer finance laws.

The case is Commonwealth v. Allied Title Lending, LLC.  The company is represented by Troutman Sanders LLP.