Posted on Fri, Feb. 09, 2007

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Did you hear the one about how poor people can’t get payday loans?

By WARREN BOLTON

Associate Editor

SOME OF THE claims supporters of payday lending made during a House subcommittee hearing Wednesday had me murmuring, “They must be joking.” But they weren’t.

I’ll share two with you:

Claim No. 1: Jabo Covert, vice president of government affairs for Check into Cash based in Tennessee, told House Banking and Consumer Affairs Subcommittee members the attempt to rescue consumers from usurious interest rates charged by his company and other payday lenders is part of a movement being engineered by “anti-business groups across the country.”

Silly me. I thought this was a push by consumer advocates, responsible leaders and individuals trying to do that right thing. But this is an anti-business campaign?

So, that’s why Columbia City Councilman Daniel Rickenmann, a businessman and as pro-business as they come, is excited about the prospect that the state might enact tough restrictions on payday lending. He even wants tougher local restrictions.

And I guess that’s why other businessmen in Columbia and other parts of the state have written or called me to say they want South Carolina to stop payday lenders from ripping off borrowers. Some have helped bail out employees who had gotten trapped; one Columbia company has an informal process to help employees entangled with the lenders.

Perhaps that’s why Rep. Alan Clemmons, a Republican from Myrtle Beach who describes himself as “very conservative” and “very pro-business,” is leading the charge to cap the annualized interest rate payday lenders can charge at 36 percent. Rep. Clemmons, an attorney who also is in the banking industry, began raising questions after a plea from a constituent. Guess what? That constituent is a businessman who wanted to share concerns about payday lenders after one of his minimum-wage employees had gotten caught up in a debt cycle.

Mr. Clemmons said he went to colleagues in the Legislature, who represent citizens from all parts of the state, and asked whether their constituents would be hurt if payday lending were tightly restricted.

“I was given an emphatic ‘no,’” he said. “I was told by those folks this manner of lending is hurting our communities.”

His attempt to cap the interest rate payday lenders can charge is “the proper thing to do and it’s the right thing to do,” Mr. Clemmons said. “Every bank I’m affiliated with would jump at the opportunity to make 36 percent.”

With North Carolina and Georgia having squeezed out payday lending — very wise moves on their parts, I might add — South Carolina has become a “payday lender Mecca,” Rep. Clemmons said. “They’re putting them on every corner.”

That’s certainly what it seems like to Rep. Chris Hart, D-Richland, who’s concerned about the proliferation along Broad River Road in his district. (A retired Methodist minister I talked to said he counted 21 along the roadway.)

Claim No. 2: When subcommittee member Rep. Grady Brown, D-Lee, said he represents an extremely large proportion of poor people, I thought he too was going to talk about how badly his constituents were being hurt. But he went in another direction.

He said taking away payday lending would be like removing a lending “arm” people depend on to help them get by.

OK, I thought. So, poor people in his district rely on payday loans. But later, he went in the opposite direction: “Poor people can’t get a payday loan,” he said. “A person without a checking account can’t get a payday loan. Very few poor people have checking accounts.”

So, why does he seem so set on protecting his poor constituents’ access to payday lenders if they can’t get such loans?

Sue Berkowitz, executive director of the S.C. Appleseed Legal Justice Center, said she’s dealt with quite a few poor people who take out payday loans. (There have been studies that show payday lenders have targeted the poor as well as minorities and the military, by the way.)

“Poor people do have checking accounts,” Ms. Berkowitz said. “The working poor have checking accounts.” She added that there are a lot of “unbanked” people in South Carolina, and that’s a problem to be dealt with.

Mr. Covert said poor people aren’t payday lenders’ target customers. He said “middle-class America,” folks who earn $25,000 to $50,000, are their customers. He said that includes teachers, nurses, EMT workers.

But don’t tell that to the two women on disability who came to my office a few weeks ago, one with 10 outstanding payday loans and the other with six.

And don’t tell that to Joy Jay, executive director of the Mental Health Association in South Carolina, whose organization represents thousands of people with disabilities. She said the association has clients who can manage bank accounts, but don’t have the comprehension to understand the world of payday lending. Many get the loans, encounter trouble and need help to escape.

Ms. Berkowitz says people on Social Security or SSI whose monthly income is $600 or $700 have checking accounts and often find themselves getting payday loans. They get in trouble trying to repay the $345 owed on a $300 loan, she said. If they’ve got multiple loans, they find themselves in even deeper debt. “You can’t pay back loans your income does not support,” she said.

Now, she’s not joking.

Reach Mr. Bolton at (803) 771-8631 or wbolton@thestate.com.