If he won’t lead, Sanford mustn’t hinder efforts to rein in payday lending

By WARREN BOLTON

Associate Editor

AFTER READING a brief item in Friday’s newspaper about Gov. Mark Sanford’s comments regarding payday lending, I scribbled a note to myself to find out more about it.

According to the brief, the governor said last week that he doesn’t see South Carolina joining Georgia and North Carolina in putting the clamps on payday lending. His remarks came as the South Carolina Silver-Haired Legislature named payday and car title lending its No. 2 priority for the 2007 legislative session.

I had moved on with the rest of my day when the telephone rang. It was Joel Sawyer, the governor’s press secretary. He asked if had I seen the brief. He said he knew of my interest in payday lending and he wanted to clarify the governor’s position.

“The governor was unequivocally clear that payday lending is not something he’s necessarily fond of,” Mr. Sawyer said.

At the same time, he said, the governor doesn’t want to take an option away that helps some borrowers, even though they might be making bad decisions about their finances.

He said that there are some people who need something to turn to and that it might not be advantageous to drive that business underground.

Mr. Sawyer said the governor has talked with military officials and understands concerns about how payday lending could affect the lives of servicemen and -women who make bad decisions.

The Department of Defense wants Congress and state legislatures to pass strict regulations, including a 36 percent cap on annual interest rates for loans made to service members and their families. A U.S. House-Senate conference committee is considering such a rate ceiling for small, short-term loans to service personnel.

Mr. Sawyer said some folks “appreciate” having the payday lending as an option because they have nowhere else to turn.

Maybe so. But, as I pointed out to him, even if some people do like having the option, they can hardly “appreciate” the nearly 400 percent interest rate allowed in South Carolina.

There is no reason for this state to allow its people, whose incomes trail those of folks in most other states, to be lured into a cycle of debt from which they can’t recover. These predatory lenders should not be allowed to charge absurd interest rates. I understand some people are higher-risk borrowers and it’s only right for lenders to be able to charge them a higher rate. But should that higher rate be triple digits? Being a high risk shouldn’t mean you have to become an easy mark for legalized loan sharks.

That’s wrong. And it would be nice if our governor and lawmakers acknowledged that and put a stop to it. I’d prefer payday lending be banned. But, short of that, the least South Carolina should do is put strict restrictions on the industry to stop it from ripping off our people.

But I’m not so sure our leaders have the courage to take on the deep-pocketed payday lenders who spend lots of money lobbying decision-makers and contributing to political campaigns across the country, including in South Carolina. (In the 2002 elections, Spartanburg-based Advance America, the nation’s largest payday lender, contributed thousands to Republican and Democratic candidates for statewide office, including candidate Mark Sanford and then-Gov. Jim Hodges. In July of 2004, the payday lender flew Gov. Sanford to the National Governors Association Meeting in Seattle. Sen. Tommy Moore, Gov. Sanford’s opponent in November, has received contributions from payday lenders as well.)

“In South Carolina, there’s just not a political will to go as far as North Carolina and Georgia have done,” Mr. Sawyer said. “What the governor said he’d be open to is some trimming around the edges versus what North Carolina and Georgia did.”

But we need more than “trimming around the edges.” In other states where edges have been trimmed, cunning lenders have simply found ways around the law to ensnare people in a series of bad loans. We’re not talking about folks who help bail someone out in an emergency once and are satisfied. They want repeat customers, borrowers who have nowhere else to turn, who must come back over and over.

Georgia and North Carolina have banned payday lending. Consequently, many of those lenders are moving to South Carolina, where they can still legally reap obscene profits from unsuspecting borrowers.

Mr. Sawyer said payday lending isn’t going to be one of the governor’s top priorities. He reminded me the governor’s top three issues will be restructuring, competitiveness and school choice. Of course, I didn’t expect payday lending to be any kind of priority for Gov. Sanford. In a way, it’s good news that he won’t lead the charge; he hasn’t been particularly effective delivering on any key issue he’s backed so far.

So, it’s OK if the governor doesn’t lead. But he must not stand in the way if significant momentum is built to do something to severely restrict this unsavory business.

And let’s pray that some brave souls in our Legislature are willing to tell payday lenders that they’ve taken advantage of this state’s consumers long enough.

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