(Columbia) June 3, 2003 - Governor Mark Sanford signed a bill Tuesday created to protect South Carolina consumers from unfair high interest loans and unscrupulous lenders.

Under the new predatory lending law, companies are blocked from making high-cost loans that hurt particularly low-income and elderly borrowers. It requires anyone seeking to borrow money at a higher-than-market interest rate to attend a free credit counseling session.

The law also bans certain practices such as flipping, which is the repeated refinancing of loans typically done when a borrower is having trouble making payments. Flipping often puts the borrower further into debt while generating a high fee income for the lender.

Rep. Harry Cato, (R) Travelers Rest, says, "There's a fine line between under regulating and over-regulating, between protecting the consumer and driving business out of the state. We're near that line. We are so close to that line."

Sanford say the law balances consumer protections against excessive regulations in the lending industry. Members of the American Association of Retired Persons, South Carolina Consumer Affairs and the NAACP were on hand for the signing.

The law gives consumers protection for first mortgages for the first time since 1982 and requires mortgage brokers to work in the consumers' interest and define how much can be charged in lending fees before a loan is deemed "high-cost."

The law also requires free credit counseling for consumers seeking "high-cost" loans. The legislation says the lender of a high-cost home loan may not finance points and fees of more than 2.5 percent of the total loan.

Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center in Columbia, who has worked on the legislation since 1999, says the law is as strong as predatory lending laws in North Carolina, New Jersey and New Mexico.

Mother of four Victoria Reed says she's struggling to keep a roof over her head at her Irmo home, "I will be paying a long time for my stupidity." She can't afford repairs because she's still paying for a phone call she received nearly five years ago.

Victoria had 17 years on her mortgage at the time and was paying 11%, so she was hooked when she heard the sales pitch, "They offered me a 15 year mortgage at six and a half percent."

Victoria started signing after the broker showed up with promises of a lower rate and lower monthly payments, "I gave a cursory glance to most of them, assuming of course that what we discussed and what I wanted was exactly what was in front of me."

She was wrong. After the deal was done, Victoria realized she actually signed for a 30 year loan at more than 11%, "It's our own foolishness and ignorance that puts us in a position to be vulnerable."

You could say Victoria fell victim to the paperwork shuffle. Looking at the documents there are so many different interest rates, monthly payments and terms listed, it's tough to figure out exactly what she signed.

A house payment for Victoria that used to be a little more than $400 is now $732 a month.

By Judi Gatson
Updated 5:51pm by BrettWitt with AP