Legislators join suit over loansPayday lenders face new complaint By Yvonne Wenger (Contact)
The Post and Courier
Thursday, September 20, 2007
Payday lendingTHE ISSUE: Payday lenders say they make short-term loans to borrowers to bridge the gap between paychecks for people who get in a jam. Critics say the loans trap lower-income residents in a cycle of debt by charging annual interest of up to nearly 400 percent. THE PROBLEM: Pending legislation to reform the industry stalled earlier this year; 13 legislators have signed on as legal representatives in lawsuits against lenders. Some see that as a conflict of interest since the legislators might consider bills regulating the payday lending industry at the same time they are fighting the industry in court. WHAT'S NEXT: The Legislature is expected to consider a number of bills aimed at restricting the industry when it reconvenes in January. Meanwhile, the court action will move forward. Payday lenders face new complaint COLUMBIA — About a dozen state lawmakers who say payday lenders use predatory practices to prey on the vulnerable have signed on to help represent plaintiffs in a new lawsuit against companies that make payday loans. Former U.S. Attorney Pete Strom, lead attorney for the lawsuit, which seeks class action status, said he called on legislators as co-counsel because of their expertise. But others say it is a conflict of interest that will ruin negotiations for legislative reform. "These lending practices cause innocent people to lose their property and their ability to support their families, and the magnitude of this problem in South Carolina is enormous," Strom said. The lawsuit, filed Tuesday in Georgetown County, accuses Spartanburg-based Advance America, Cash Advance Centers of South Carolina Inc., of violating state law by making "unconscionable" payday loans to those who can't afford to repay them. The plaintiffs are Lisa Johnson of Andrews and Gilbert Herbert of Clinton. Strom said he plans to file additional suits against other companies soon. Tuesday's complaint is the third filed in the state in recent weeks. State Sens. John Hawkins, R-Spartanburg, and Vince Sheheen, D-Camden, filed two other suits in the past month against five payday lenders on behalf of residents in Horry and Spartanburg counties alleging violations of at least two state laws: the Deferred Presentment Services Act and the Consumer Protection Act. Payday loans are made on a short-term basis and allow a person to borrow cash against a post-dated check with future earnings used as collateral. Interest is generally $15 for each $100 borrowed. Jamie Fulmer, a spokesman for Advance America, defended the practice and argued that it provides a needed service that helps people faced with emergencies or unbudgeted expenses bridge the gap between paychecks. Fulmer said borrowers generally use the service responsibly and the company has high customer satisfaction and repayment rates. "We do not take these accusations lightly," he said. "We operate a legal and regulated business in South Carolina." Fulmer said he is concerned about lawmakers serving as legal counsel on the case. "We now have concerns about how these legislators can act impartially in their role as elected officials," he said. Rep. Fletcher Smith D-Greenville, who is serving as co-counsel in Strom's suit, said the lawsuit won't interfere with future reform. The suit seeks unspecified financial damages. "Democracy is a slow process," he said. "However, people are being undermined financially across the board. Their only redress is to seek action in a court while the legislative process is going on." When it reconvenes in January, the Legislature is expected to consider pending bills aimed at reforming the industry. Many are concerned that the companies charge too much interest and trap borrowers in a cycle of debt. Sen. Robert Ford, D-Charleston, called the lawsuits "regrettable" because he said they will damage legislative reform efforts. Ford has been a big proponent of stricter regulations on the industry. "There is a need for low and moderate income people to go somewhere and get a loan," he said. "All I want to do is regulate it and make sure no one is getting taken advantage of. To file a lawsuit is going to ruin any chance we had to work something out with the industry." Senate President Pro Tem Glenn McConnell, R-Charleston, said he hadn't yet seen the specifics of the most recent lawsuit. "If their suit is on the violation of the law, then that is the proper arena. But if it's to reform the law, the arena is the floor of the Legislature," he said. In addition to Fletcher Smith, serving as co-counsel are Sens. Luke Rankin, R-Myrtle Beach, Brad Hutto, D-Orangeburg, David Thomas, R-Greenville, and Reps. Jim Harrison, R-Columbia, Chris Hart, D-Columbia, Doug Jennings, D-Bennettsville, Murrell Smith, R-Sumter, Creighton Coleman, D-Winnsboro, Todd Rutherford, D- Columbia, and David Weeks, D-Sumter. Reach Yvonne Wenger at (803) 799-9051 or ywenger@ postandcourier.com. |
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Comments
This article has 4 comment(s)
Posted by crankyyankee on September 20, 2007 at 8:46 a.m. (Suggest removal)
The taxpayers need protection from the Legislators more than the poor need help from loan companies. If they were concerned about people being cheated why do they propose such crap as a string bean museums. You elected them!
Posted by majorjohnson on September 20, 2007 at 9:07 a.m. (Suggest removal)
Class action lawsuits make attorneys very rich and seldom do anything for the plaintiffs. That we have 12 legislators jumping on the cash bandwagon is pretty disgusting. I used a payday lender when I was in college, and I paid them back. I was grateful that they were willing to loan me the small amount I needed to get my ride running again between checks. These people borrowed the money and instead of paying the lender back they borrowed more from a different lender to pay off the first loan, then borrowed from the first lender to pay off the second loan. As far as I'm concerned it's the lender who is doing micro loans to these people and the people who actually use them responsible when no bank will make them a small loan who will be hurt in the end. In the meantime these legislators will probably make millions each and the lenders will leave, leaving those who use them responsibly for emergency short term loans with no one to go to.
Posted by jeffyoung007 on September 20, 2007 at 12:26 p.m. (Suggest removal)
The legislators are jumping on the bandwagon because the defendant is a competitor of the company Tommy Moore left the senate to work for. Advance America Cash Advance is a member company of CFSA, which Moore left in July 2007 to be Executive Vice President.
Posted by lillycollette on September 21, 2007 at 5:39 a.m. (Suggest removal)
The legislature claims it is concerned about “unconscionable predatory practices -- in violation of law -- that prey on the vulnerable” and “cause innocent people to lose their property and their ability to support their families”.
-- REALLY --?
Then why are these same legislators not addressing the case of the woman who forged the signature of a disabled man to a marriage license so that she could defraud him out of his property and means through a bogus divorce?