Payday lenders might be reined inBan narrowly defeated; legislation in House By Yvonne Wenger (Contact)
The Post and Courier
Monday, February 25, 2008
To get helpTo get credit counseling and help with debt management, call Family Services Inc. in North Charleston at 744-1348, ext. 10. COLUMBIA — Borrowers could have only one payday loan at a time worth $500 or less under state legislation aimed at tightening restrictions on an industry some say traps clients in a cycle of debt. The Senate sent the legislation — after closely defeating a proposed ban on the industry — to the House for consideration. "I am not pro-payday lending or anti-payday lending," said Rep. Wallace Scarborough, R-James Island. "I am trying to do the best for the people of South Carolina. I am trying to help reach a compromise. I think people are shortsighted if they say we need an outright payday lending ban." Payday loans are small, short-term, unsecured loans that borrowers promise to repay out of their next paycheck or regular income payment, according to the Federal Deposit Insurance Corp. Scarborough, a member of the House committee that will first review the Senate bill, said the Legislature should find ways to "clean up the industry." The lenders, he noted, serve a purpose for people who need the types of loans not available at banks. The bill requires a seven-day cooling off period between loans and caps the amount at 25 percent of the borrow's income for the term of the loan, or a maximum of $500. That means a typical borrower with an annual income of $25,000 to $30,000 could borrow about $250 to $300 during a two-week period. The bill also calls for the state's Board of Financial Institutions to maintain a database of borrowers and allows customers to repay the loans in installments over a period of at least 60 days. Susan Berkowitz, director of South Carolina Appleseed Legal Justice Center, said payday lenders are "manipulating" existing state law and lending borrowers up to $600 at once with annual interest rates of up to 390 percent, or $15 for each $100 borrowed. Many are left taking out additional loans to pay back others, she said. Berkowitz said she recently spoke to an 87-year-old woman, who did not want to have her name made public, that had half a dozen loans. "When I say it breaks my heart — it is just wrong," Berkowitz said. Jamie Fulmer, director of public affairs for Spartanburg-based Advance America, said thousands of South Carolinas rely on the industry and don't abuse it. He said in states like Georgia and North Carolina that have banned the lenders, a recent independent study found that consumers are incurring more bounced check fees and higher instances of bankruptcy. "It clearly demonstrates that just because you've eliminated a product doesn't mean you've eliminated a need for a product," Fulmer said. Banning the industry also leads people to find Internet lenders unregulated by state laws, he said. Sen. Robert Ford, D-Charleston, originally filed the legislation in February 2006 to force the lenders out of the state. "It's a vicious cycle that means people stay in debt," Ford said. Although the ban did not pass, Ford said putting the restrictions in place is a better solution because he thinks many lenders will leave the state, leaving a few, but necessary, lenders as an option for people who get caught short on cash. Next, Ford said, he wants to target lenders who use car titles to make high-interest, short term loans and credit card companies that charge exorbitant fees. "That's another monster," he said. Reach Yvonne Wenger at 803-799-9051 or ywenger@ postandcourier.com. |
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Comments
This article has 12 comment(s)
Posted by JohnS on February 25, 2008 at 8:07 a.m. (Suggest removal)
Wow two junk bills from Sen Ford in a few weeks. The landlord bill and now a bill telling people how to spend their money. I guess next month he will come up with a bill against "all you can eat places" where you must take your height and weight before going in. People need to be responsible for themselves.
Posted by 5thGenerationLocal on February 25, 2008 at 8:23 a.m. (Suggest removal)
How is this a PayDay places fault? If some a-hole can't figure out how to budget, then that is their fault. Their wounds are self-inflicted and not my responsibilty. This bill is a waste of time.
Posted by archdude on February 25, 2008 at 8:28 a.m. (Suggest removal)
RESPONSIBILITY--the only word needed for a response about payday lenders (a parasitic financial service that preys on those who cannot responsibly manage their funds).
Posted by majorjohnson on February 25, 2008 at 8:44 a.m. (Suggest removal)
I needed a payday lender once when I was in college. I had to fix my motorcycle and didn't have the cash to do so. I borrowed the money, fixed the bike, was able to continue working and getting to school and I repaid the loan ASAP. Try asking your bank for a loan to replace the water heater or fix your car when you don't have the immediate cash to do it. As far as that annual interest rate, these are not long term loans that last for a year, they are short term emergency cash loans, the vast majority of people who take them need them, have no other source for them, repay on time, and appreciate the availability. Why should everyone who might one day need this lose access to a valuable service because a few people misuse it and get themselves in financial trouble? By that standard checks, credit cards and mortgages shouldn't be allowed either.
Posted by ColdBeer on February 25, 2008 at 9:23 a.m. (Suggest removal)
My only problem with these places is that, just like pawn shops, they make an area look bad.
As far as the government stepping in to control them, it shouldn't be needed, but it's not the first time that the government has stepped in and regulated lending institutions.
Posted by blondjes on February 25, 2008 at 10:20 a.m. (Suggest removal)
I used to work at one of these places in North Charleston, it was horrible, i think they should limit how many of these places can open up on a block, they bring some bad people around, trust me, not all were bad but most of them were, and they get themselves into debt not the other way around
Posted by BillytheKid on February 25, 2008 at 10:38 a.m. (Suggest removal)
360%, THAT IS OUT OF LINE!!!!!!!!!!!!!!!!!
Posted by eyeinthesky on February 25, 2008 at 10:50 a.m. (Suggest removal)
Help... protect me from myself!!!!!
Make more laws quick... before its too late!!!!
Posted by anon on February 25, 2008 at 3:46 p.m. (Suggest removal)
In Summerville there is one in EVERY strip mall. They have literally taken over the area and yes it does make the town look bad. Every time a new strip mall goes up we make a joke that the primary tenants will be cash advance and title loans and we are usually right. There is no need to have so many of these places, it sends a bad message. What's next? bail bonds?
Posted by jennday on February 25, 2008 at 8:04 p.m. (Suggest removal)
In related news, the fountain drink you just paid $1.19 for only costs McDonald's 3 cents in raw materials. I think that beats 400% payday loan interest. You people are getting screwed worse by McDonald's everday than a payday loan borrower. Close the McDonald's they just made a 1.16 profit on you for a 3 cent product. Nobody held a gun to your head to buy that coffee ! I assumed they didn't do it at the payday loan store either.
Posted by please_believe_it on February 26, 2008 at 4:17 a.m. (Suggest removal)
Policiticans count on the irresponsiblity of many citizens to give them the support to try to control every situation in life...'preying on the irresponsbility of the public'...sounds a lot like a payday lender to me.
Posted by rmichelle417 on February 26, 2008 at 11:10 a.m. (Suggest removal)
I work for a check cashing company that offers payday advances as well. First and foremost I think it is absurd that the government is trying to control everyhting. The lenders are not the problem, the customers are. If people would budget better then we would never have this problem. I agree that people get new loans to pay existing loans and that is crazy, but the lenders do not make the consumers come into the stores, it is the peoples fault that they stay in debt. I have been in the business for years and if they ban this they will be putting a lot of people out of jobs and yet still consumers will find more ways to get in debt and borrow from others. The government needs to worry about many other big issues than to try to tell us how to spend out money and stop trying to blame lenders. These loans are meant for temporary loans, but people splurged so much on wasteful things that they end up falling further and further in debt. BLAME THE CONSUMERS!