Date Published: February 5, 2007   

Lawmakers eye payday loans

State proposals would regulate or get rid of lending businesses

By LESLIE CANTU
Item Senior Staff Writer
lesliec@theitem.com

Local legislators signed on to two new bills this week that take vastly different approaches to regulating payday lending.

The bills, filed Thursday, join two previous bills that would regulate the interest rates that could be charged and the number of loans one person could have at a time.

State Rep. Cathy Harvin, D-Summerton, is co-sponsoring a bill that would prevent new payday lenders from locating within three miles of an existing payday lender or check-cashing service.

State Rep. David Weeks, D-Sumter, is co-sponsoring a bill that would eliminate payday lending altogether, making the practice a felony.

The two are also co-sponsors of a previous bill, along with state Reps. Joe Neal, D-Hopkins, and Grady Brown, D-Bishopville, that limits fees to $5 per loan and the annual percentage rate that could be charged to 36 percent.

Currently, payday lenders can charge fees of 15 percent of the face amount of the check.

Consumer groups call payday lending predatory, but the industry says it fills a need for small, short-term loans that banks don't offer.

North Carolina and Georgia have clamped down on payday lenders in recent years, and Weeks said some companies are looking at South Carolina's lax rules and setting up shop here.

The Center for Responsible Lending, using regulatory data, showed 1,066 payday lenders in South Carolina in 2005 that made 4 million loans at an average amount of $285.

Weeks said regulation is a better approach than outlawing the lenders, which are a viable industry.

Still, Weeks said, with Congress setting caps on the interest rates that can be charged to military members, "there's really no reason for nonmilitary folk to be ripe for the picking."

State Rep. Murrell Smith, R-Sumter, said he understands the arguments on both sides, but he thinks the issue is more complex than any of the solutions presented so far. Most of the advocates for regulation, he said, are really proposing bills that would effectively abolish payday lending because an annual percentage rate of 36 percent, when amortized to a couple of weeks, means "you're talking about pennies that they're going to get back."

He'd like to see a study committee look at the overall issue. It's still a little early to judge whether a 2003 predatory lending bill improved the system, he said, but that law should deal with most of the concerns surrounding payday lending.

Harvin said she added her name to the bills out of concern for those who are preyed upon and don't realize the cycle of debt they might be entering.

"It doesn't seem inappropriate for there to be some limitation on the amount of interest that could be charged," she said.

However, she said she'll be doing more research on the issue, and if it appears the loans are fulfilling a need more than taking advantage of people, she'll remove her name from the bill.

"I do understand that there are situations where people have a real need to pay for medication, to pay an electric bill," Harvin said.

Although the largest payday lender, Advance America, is based in South Carolina, Weeks said he sees a strong cross section of representatives interested in regulation, and he thinks the General Assembly will take some type of action this year.



Contact Senior Staff Writer Leslie Cantu at lesliec@theitem.com or (803) 774-1250.