March 19, 2006
The Miami Herald
BINYAMIN APPELBAUM

The S.C. legislature may consider limiting borrowers to a single payday loan at any given moment, a reform long desired by consumer advocates.

Several legislators said it was now likely such a bill would be introduced for discussion during the current session, with an eye toward action next year.

The prospects for passage are uncertain. "Hopefully we can get enough support where we force (the industry) to come to the table and do something meaningful," said state Rep. James Smith, a Richland County Democrat who is working with consumer advocates to write a bill.

The Observer reported earlier this month that payday lending is on the rise in South Carolina, driven in part by bans on the high-interest loans in neighboring North Carolina and Georgia. The number of S.C. payday stores grew by 14 percent last year, and by 25 percent in the border counties of York and Lancaster.

Anyone with a job and a bank account can qualify for a payday loan. You give the lender a check, cashable on your next payday, for the loan amount plus a fee; the lender gives you cash.

S.C. law allows payday lenders to charge 15 cents for every dollar borrowed. On a loan due in two weeks, that's an annualized interest rate of 391 percent. The maximum loan is $300.

The industry says it is meeting a need for short-term cash. But critics say many people borrow once to meet an emergency, then keep borrowing because they cannot repay their debt.

For example, a person who borrows $300 owes $345 two weeks later. If they can't pay the debt, they can pay $45 in interest, and take a new loan to cover the rest.

"Some will say, that little man has to have somewhere to go," said state Rep. Eldridge Emory, a Lancaster County Democrat. "But if he gets money this way, he's just digging a hole deeper and deeper and he's not going to get out."

Emory sits on the Labor, Commerce and Industry committee, which would consider any payday legislation. He said the recent departure of the last payday lenders from North Carolina had moved the issue "onto the front burner."

The Observer reported that N.C. residents are driving south across the border to get loans in places such as Rock Hill and Clover, causing a rapid increase in the number of payday lending stores.

Some states that allow payday lending, such as Florida, limit people to a single outstanding loan at any one time. To enforce the rule, the state requires lenders to record each transaction in a central database supervised by the state.

The average Florida borrower still took eight payday loans in 2005. But by requiring each loan to be repaid before another loan can be made, the law prevents people from accumulating debt, and it ensures they pay only one fee for each loan.

The result? S.C. stores made five times as many loans per capita as Florida stores during the 12 months ending August 2004. More recent loan data is not available for South Carolina.

Some consumer advocates would like South Carolina to ban payday lending, joining 14 states, mostly in the Northeast but including North Carolina and Georgia. But most advocates say their realistic goal is to push South Carolina to adopt a law like Florida's.

They want to introduce a bill now, during the second year of a two-year session, to begin the process of hearings and discussion, preparing the ground for a renewed effort when the legislature reconvenes next year.

"We hadn't gotten the momentum we hoped for until now," said Sue Berkowitz, director of the S.C. Appleseed Legal Justice Center in Columbia. "If something gets introduced and we at least get a dialogue going, that's a very positive move."

Concern about the current S.C. law is not universal. The nation's largest payday lender is based in Spartanburg. The company, Advance America, Cash Advance Centers, Inc., has said it likes the law. South Carolina's government has a strong tradition of minimizing its regulation of businesses.

State Rep. Ralph Norman, a York County Republican, said he saw no need for more regulation.

"It's a free market and they're competing with a lot of other financial institutions," Norman said. "Time will tell how successful they will be."