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Article published Mar 9, 2005
AARP
presses state to curb payday loans
AARP South Carolina, saying
that payday lending is out of control, wants state legislators to clamp down on
the industry.For a study released today, AARP South Carolina enlisted the aid of
13 credit counselors from three organizations -- Family Services Inc.'s Consumer
Credit Counseling Division, Army Community Services and Compass Carolina -- to
survey 8,100 clients.One in four surveyed reported that payday loans contributed
to their credit problems. Those who said that payday loans added to their
problems usually had multiple loans at one time, according to the report.Clients
also told the counselors that payday lenders had threatened them.The threats
ranged from telling customers their wages would be garnished if they didn't
repay the loans, to telling them they would go to jail for writing a bad check
to cover the loan, according to the report."All of those are illegal," said
Teresa Arnold, AARP South Carolina's legislative director. "They aren't allowed
to make those kinds of threats, and the fact that they are tells us that maybe
the industry isn't regulated as much as it should be."Payday lenders provide
loans up to $300 for up to 31 days. They charge up to $15 for each $100
borrowed. The borrower provides a check for the amount of the loan, which the
lender holds until loan is repaid or the term expires. If the loan is not repaid
by the agreed upon date, the lender presents the check to the borrower's bank.In
2003, payday lenders charged $122 million in fees on more than 3.5 million
loans, according to the report.Advance America, the nation's largest payday
lender, has its headquarters in Spartanburg. The company has been a champion of
running a "clean" industry.CEO Billy Webster said that any company breaking the
law should have to pay the price. He added that Advance America officials have
reported people to the Department of Financial Institutions when they have
learned of illegalactivity."It's inexcusable to use the threat of criminal
prosecution to try to collect on a payday loan," Webster said. "It should be
stopped by the appropriate state or local official."Advance America does not
allow people to have multiple loans at one time. It also does not allow
customers to roll over loans -- the practice of renewing a loan before paying
off the current debt.Webster said he is not surprised that AARP South Carolina
has taken the position it has, given the national association's opposition to
the industry. He questioned the validity and the methodology of the study."I
would think that most households are not going to a credit counselor because of
a $300 obligation," Webster said. "Usually it's because of a second mortgage or
excessive credit-card borrowings."AARP's Arnold said the group would ask
legislators to place stronger restrictions on payday lenders, including limiting
consumers to one loan at a time. She also said the group would press for all
loans to be placed on a real-time data base so lenders can see whether a
potential customer already has a loan outstanding."We're very hopeful that this
report will raise awareness of payday lending," Arnold said. "It's eating away
at the economic fabric of South Carolinians, and we hope to help get some
changes made."State House Speaker Pro Tem Doug Smith, R-Spartanburg, said he
appreciates AARP South Carolina's efforts. But he said the current laws
governing the industry are sufficient."The bottom line is that as with any
industry, there are going to be those that don't comply with the law," Smith
said. "We can overreact and over-legislate, or we can ask Consumer Affairs or
the attorney general to go after those who break the law."Robert W. Dalton can
be reached at 562-7274 or bob.dalton@shj.com.