Monday, January 22, 2007

How does The State feel about South Carolina’s payday advance law? Let’s paraphrase a recent editorial from the paper below and find out …

“Rewrite!”

To journalists, that term means it’s time to make changes - sometimes drastic ones - on a finished piece.

But when visitors to the paper’ office last week kept using the word to describe their dealings with multiple payday cash advance lenders, it meant something altogether different.

In the payday lending world, “rewrite” essentially means to renew a loan over and over again. According to these visitors, who didn’t want their names used - let’s call them Diane and Donna - it works like this:

• If they take out a $300 loan, they would give the lender a $345 check, which includes a $45 fee, to hold. When they return to pay the no credit check payday loan off, they present the cash, their existing loan would be closed, a new one is immediately opened, and they leave with another $300.

“Rewrite!”

That’s a big reason payday lenders are raking in fees of $186 million a year in South Carolina and $4.2 billion a year nationwide. They lure people in by offering short-term cash advance loans, only to take advantage of the fact that people can’t repay them.

Borrowers find themselves in a cycle of debt they can’t escape.

A study released in 2004 by the Center for Responsible Lending, in Durham, N.C., found repeat borrowers account for 91 percent of payday lenders’ revenue. The study found those who borrow from payday lenders receive, on average, eight to 13 loans a year from a single source.

Diane and Donna, both on fixed incomes, said they routinely get rewrites. Most times, they use money from one rewrite to - you guessed it - pay off yet another cash advance payday loan.

Our Legislature needs to do a rewrite on the law that allows payday lending.

As it stands, lenders can charge an annualized interest rate of 391 percent. The law limits loans to $300 each and prohibits the use of one loan to pay off another in an attempt to limit multiple loans in one location. But providers of bad credit payday loans extend more than one loan at times, stretching the spirit, if not the letter, of the law.

“I have several. I’m in over my head with it,” said Diane, who is disabled, retired and the mother of two young daughters. She said she has 10 outstanding loans with payday lenders, most located in the Two Notch Road area.

Ask her about her loans and she can rattle off the names of the companies and amounts. On one personal loan, she owes $250 in principal and $37.50 in fees for a total of $287.50. On another of $350, she owes $52.50 in fees for a total of $402.50.

A $350 payday loan? How is that possible when they’re capped at $300? She actually has two different sets of paper work, each for $201.25, she said.

If she continues getting rewrite after rewrite, which she says is her only option at the moment, she’ll pay $1,080 in fees a year on just three of her 10 loans. And she’ll still owe the principal.

“It’s like an addiction. You’re trapped. You can’t get out of it,” Diane said. “They’re loan sharks. They just need to ban them altogether.”

Her friend Donna kept insisting she wasn’t in as deep as her associate. “I don’t have that many,” she said.

What does not having that many mean, I asked.

“Six.”

“I’m going to try to pay mine off. But they’re going to have to give me some time and work with me,” Donna said. “I want out. It has gotten so bad that sometimes I can’t pay my tithes.”

She said the faxless payday loan lenders are located everywhere. “More of them are going up than grocery stores.”

The women said they take issue with payday lenders who say they don’t target certain communities, such as the elderly, the poor, minorities and the military.

“If you go to Two Notch Road that’s all you’re going to see,” Donna said. “I’ve seen plenty elderly going into these places.”

Diane said there is a large group of people trapped by the online payday advance world who travel from lender to lender. “When we (leave) one place, the next place it’s the same people,” Diane said.

She said she’s done business with payday lenders on Two Notch Road, Decker Boulevard and Knox Abbott Drive, and estimates that “about 95 percent” of the borrowers she sees are African-Americans.

“I don’t see that many Caucasians in there,” she said. “They do target the elderly people. The low-income families, we are targeted.”

Both women say they got themselves in trouble by going to no faxing payday loan lenders, but they felt they had no where else to turn. Still, they don’t see why the fees have to be so high.

“I’m not trying to put these people out of a job. I’m just saying do what’s right,” Donna said.

They said they’d like to get up a petition to get the law changed. They ask whether 20,000 signatures would make a difference.

It most likely would make an impression on legislators, we tell them. But, in the end, it’s up to lawmakers — and the governor — to “do what’s right.”

What’s right? “Rewrite!”

This entry was posted on Monday, January 22nd, 2007 at 6:04 am and is filed under South Dakota.