A bill introduced recently by S.C. Rep. Alan Clemmons, R-Myrtle Beach, would do just that. His bill would limit annual interest rates to 36 percent and fees to $5 for every $100 borrowed.

Those caps are identical to federal standards for loans to military personnel put into place last year. But Clemmons' bill also would prevent lenders from having multiple loans with each customer, one of the practices that creates a cycle of debt that borrowers often find impossible to break.

South Carolina now is among 10 states where consumers pay the most for small loans. Payday lending cost borrowers in the state $186 million in 2005, and most of that came from the exorbitant fees charged for each transaction.

Because of the state's largely hands-off approach, payday lenders can charge up to 15 cents for every dollar borrowed, often requiring loans to be paid in full within two weeks. The annualized interest rate on such loans totals nearly 400 percent.

There is little question that these lenders fill a niche in the community. Their customers often are low-wage earners who have little collateral or credit history. And a quick loan from a payday lender can be less expensive overall than a bounced check or missed car payment -- if the loan is paid back on time.

The problem is, it often is not. That's when borrowers go deeper into debt, requiring more fees and continuously mounting interest rates. The Center for Responsible Lending estimates that 90 percent of the payday lender revenue comes from people who can't pay off loans on time. The typical consumer borrows $325 but repays $793, according to the report.

So far, 37 states, including North Carolina and Georgia, have banned or now carefully regulate payday lending, and many more are considering regulatory bills with the start of new legislative sessions. With the practice virtually banned in North Carolina and Georgia, more payday lenders have left those states and moved here. York and Lancaster counties now have at least 50 payday-loan stores, many of them located near the state line.

The effort to cap interest rates and fees on payday loans in South Carolina is not only humane but also economically smart. The average worker's wage in the state is well below the national average, and our lax laws make many South Carolinians easy marks for loan sharks.

States that have regulated payday lending saved their residents $1.4 billion in 2005. That is money that stayed in the pockets of workers rather than going into the pockets of the payday lenders. A cap on interest rates and fees in South Carolina would boost the state's economy and benefit its work force.

Clemmons' bill would allow the payday lending industry to continue operating in the state but with reasonable limits on what it can charge for loans. South Carolina does not want to be the only state in the region to be a mecca for payday lenders.

Traditional banks and lending institutions should be encouraged to offer alternatives to payday lending practices that meet the needs of low-income borrowers. But until they do, if the federal government is going to protect military personnel from usurious lenders, shouldn't the average South Carolinian have the same protections?

IN SUMMARY
A bill recently introduced in the Legislature would cap payday loan interest rates and fees.