The West Virginia Lending and Credit Rate Board (Board) was created in 1981 to set maximum charges on loans, credit sales or transactions, forbearance or other similar transactions executed in the state. Since that time, federal preemptions have weakened the Board's authority, since credit can be imported from state and national banks located outside West Virginia; rate ceilings cannot be imposed on first mortgages from banks and other lenders loaning over a million dollars; and federal parity statutes allow state and national banks to charge the same rates of interest competitors in the local market place may charge.

A state may be effective in the regulation of the credit industry by one of two strategies. It may deregulate its credit industry as many states have done to attract the banking industry, or it may decide doing so is not worth the consequences and set ceilings that are sensitive to money market changes. The West Virginia Lending and Credit Rate Board has done neither. Ceilings remained flat for the first 13 years of the Board, while interest rates were dynamic, and interest ceilings have been unfavorable to lenders compared with the thirty competitive market states

In addition, there are no purposeful enforcement efforts for those lenders subject to the Board's orders, but not examined by State authorities. The Board members have expressed frustration and most support termination of the Board, which may prevent rates being analyzed as required in the future. (See member comments in body of report.)

The Legislative Auditor recommends termination of the West Virginia Lending and Credit Rate Board.