Payday Loan Times

As the industry of payday loans grows more popular in the state, legislatures may consider limiting borrowers to a single cash advance at a time, a reform long desired by consumer advocates.

“Hopefully we can get enough support where we force (the industry) to come to the table and do something meaningful,” said state Rep. James Smith, a Richland County Democrat who is working with consumer advocates to write a bill.

The Charlotte Observer reported earlier this month that payday lending is on the rise in South Carolina, driven in part by bans on the high-interest loans in neighboring North Carolina and Georgia. The number of payday stores grew by 14 percent last year, and by 25 percent in the border counties of York and Lancaster.

S.C. law allows payday lenders to charge 15 cents for every dollar borrowed. On a loan due in two weeks, that’s an annualized interest rate of 391 percent. The maximum loan is $300.
For example, a person who borrows $300 owes $345 two weeks later. If they can’t pay the debt, they can pay $45 in interest - and often take a new loan to cover the rest.

“Some will say, that little man has to have somewhere to go,” said state Rep. Eldridge Emory, a Lancaster County Democrat. “But if he gets money this way, he’s just digging a hole deeper and deeper and he’s not going to get out.”

Emory sits on the Labor, Commerce and Industry committee, which would consider any payday legislation. He said the recent departure of the last payday lenders from North Carolina had moved the issue “onto the front burner.”

Some states that allow payday lending, such as Florida, limit people to a single outstanding loan at any one time. To enforce the rule, the state requires lenders to record each transaction in a central database supervised by the state.

The average Florida borrower still took eight payday loans in 2005. But by requiring each loan to be repaid before another loan can be made, the law prevents people from accumulating debt.

The result? S.C. stores made five times as many loans per capita as Florida stores during the 12 months ending August 2004.

Some consumer advocates would like South Carolina to ban payday lending, joining 14 states, including North Carolina and Georgia. But most advocates say their realistic goal is to push South Carolina to adopt a law like Florida’s when it comes to payday advances.

They want to introduce a bill now, during the second year of a two-year session, to begin the process of hearings and discussion, preparing the ground for a renewed effort when the legislature reconvenes next year.

“We hadn’t gotten the momentum we hoped for until now,” said Sue Berkowitz, director of the Appleseed Legal Justice Center in Columbia. “If something gets introduced and we at least get a dialogue going, that’s a very positive move.”

State Rep. Ralph Norman, a York County Republican, said he sees NO need for more regulation.

“It’s a free market and they’re competing with a lot of other financial institutions,” Norman said. “Time will tell how successful they will be.”