Payday Loan Times

Previoulsly, we asked the question: where will residents of North Carolina go to have their demands for payday loans met? The answer, it seems, is fairly obvious: just a bit south.

With payday loan lending suspended in N.C., consumers are turning their attention to South Carolina. Clover, for instance, is the first town you would encounter if you drove down from Gastonia. With a population of barely more than 4,000, this area already is home to four payday advance operations - and two more are looking for locations.

Payday lending is exploding here and elsewhere along the south side of the state line.

To wit:

– There are now 50 payday stores in York and Lancaster counties, up from 40 in 2004.
– Fort Mill's first payday loan store opened last year.
– On Cherry Road in Rock Hill, there are now 10 payday lending stores in the first 1.3 miles after a southbound driver exits Interstate 77.

Jack Flynn, who owns a payday store on the main street in Clover, says 95 percent of his business are from citizens of North Carolina looking for a cash advance. He plans to open two more stores along the state line this spring.

S.C. law allows payday lenders to charge 15 cents for every dollar borrowed, with loans due in as little as two weeks. That's an APR of 391 percent.

Consumer advocates and N.C. regulators compare the loans to a narcotic - not just bad, but also hard to escape. The Center for Responsible Lending in Durham, a leading critic, says the vast majority of payday loans go to people who already have an outstanding balance on another loan.

"I'm embarrassed for our state," said Sue Berkowitz, director of the S.C. Appleseed Legal Justice Center in Columbia, which advocates for the poor. "We're not only finding a way to prey upon our own citizens but we're finding a way to prey upon citizens across the border."

Payday loan laws in S.C.

South Carolina passed a law regulating payday lending in 1998, as companies such as Advance America were beginning to make the industry a major retail sector. There are now more than six times as many payday stores in South Carolina as McDonald's restaurants.

In Florida, which also allows payday lending, state law restricts borrowers to a single outstanding loan at any time. The law prevents people from taking a new loan to repay an existing loan. It aims to limit the use of instant payday loans, so people do not become trapped in debt.

But South Carolina's law only limits borrowers to a single outstanding loan from any particular lender. As a result, consumer advocates say many people simply alternate between two lenders, taking a new loan every two weeks to repay their existing loan.

Many consumer advocates blame Advance America. The company has become one of the largest public companies in the state. It employs several hundred people statewide and is a major political donor. According to The Charlotte Observer, South Carolona Gov. Mark Sanford used a company jet to travel to Seattle for a conference in 2004.

Asked for comment, aan Advance America spokesman said, "We feel comfortable operating under existing state law." He declined to say whether the company preferred the S.C. law to the Florida law.