Payday Loan Times

State Rep. Michael Thompson says it’s not the fees associated with South Carolina payday loans driving people into debt, it’s the number of loans they are taking out at one time.

Legislation that Rep. Thompson proposed this week would limit consumers’ borrowing to no more than $300 in 60 days and no more than six payday loans in a year. Cash advance companies also would have to grant customers a six-month repayment grace period with no charge and offer repayment plans to borrowers who can’t immediately pay back their loan.

“These things were never supposed to be a permanent fix in someone’s financial world,” Rep. Thompson said. “These were supposed to be a temporary fix for someone’s financial situation.”

House Bill 3831 would establish a statewide database to track consumers’ payday cash loans so borrowers couldn’t take loans from several different payday lenders at once.

Florida uses a similar database to regulate cash advance loans, Rep. Thompson said.

According to his bill, a fee of no more than $1 per loan would cover the cost of maintaining the database. The database would be established and operated by an outside company and the Board of Financial Institutions would oversee the system.

Companies that don’t comply with the faxless payday advance limits could face a $2,500 fine per South Carolina location, regardless of whether each store violated the law, according to the bill.

Payday lenders would have their license revoked for two years on the second offense. Consumer advocates are backing the measure, but industry representatives say it punishes responsible borrowers.

Jamie Fulmer, director of investor relations at Spartanburg-based Advance America, said his company is willing to work with legislators in creating “reasonable regulations.” But “arbitrary” caps aren’t an effective way to protect people who misuse their services, Mr. Fulmer said.

Without short-term, bad credit payday loan options, people are faced with paying bills late, bouncing a check or using an unregulated offshore Internet lender, he said.

James Wood, owner of Anderson Quick Cash, said his customers who rewrite loans do so because they are still working through a financial problem. But they stop coming in when they get back on their feet.

“The majority of customers, it’s not a lifelong thing like people think,” Mr. Wood said.

While the database would help to prevent customers from overextending themselves, he said that he disagreed with the government intrusion into consumers’ lives.

“Let a consumer be a consumer,” Mr. Wood said. “If it don’t suit you, don’t do it.”

AARP Legislative Director Teresa Arnold, who’s been lobbying in favor of restricting the instant cash loan industry, said the database is a necessary part of regulating an industry that is “virtually unregulated.”

Rep. Thompson’s bill doesn’t address all of their concerns — it does not alter the current fee structure — but it would better protect borrowers and could have a better chance of passing than other bills filed this session, consumer advocates said.

It took consumer advocates three years just to get legislation introduced, Ms. Arnold said.

“It’s astounding how many resources the industry is putting into keeping themselves business as usual,” said Sue Berkowitz, director of the Appleseed Legal Justice Center.

Even with 87 sponsors, House Bill 3294 proposing caps on easy payday loan rates isn’t going anywhere, Ms. Berkowitz said.

“I think if we can’t address the cap, as far as how much interest, capping and limiting the number of loans people can have and have a database is another way of attacking the problem,” she said.