The bill that puts restrictions on payday lenders in South Carolina that was being debated yesterday passed unanimously. The bill now has to go to the full committee, but the bill’s main sponsor Bobby Herrell, the House Speaker, said the bill is on a fast track to the House since the issue has been debated at great length last year.
“The bill does several things to protect consumers,“ Rep. Harrell says. “Number one, it only allows a person to have one loan at a time, so they can’t get themselves into trouble with multiple loans in different places. Secondly, it requires that there be a statewide database that lenders check to make sure that if somebody’s coming in to apply for a loan that they don’t already have a loan in another place.“ The bill also allows limits payday loan sizes to $600 and allows extended payment plans for people that have trouble paying back the loan.
Critics of the bill argue that the bill does not go far enough to protect consumers. For instance the bill doesn’t address the issue of the interest rate that payday lenders charge. Typically they charge a $15 fee for every $100 borrowed, which works out to an annual percentage rate of 391%. Other bills that were being considered would limit the interest rate that payday lenders would be able to charge to 36%, which is the limit the federal government has instituted for members of the military that get a payday loan.
Payday lenders argue that most people pay off their loans in a few weeks or months, so that the interest on a 391% interest rate is charged. Carol Stewart, the senior vice president for government affairs for the payday lender Advance America, told the subcommittee members that a 36% limit may sound like a good annual percentage rate but that’s not how much a payday lender would make on a loan. Instead of making $15 per every $100, lenders would make $1.14. “We’re going to loan $100 for $1.14? That’s ten cents a day per hundred that you would keep out. I think it doesn’t take long to realize that that is a backdoor ban of the industry. We couldn’t pay our light bills,“ she told the subcommittee.
To read more about new payday lending restrictions pass South Carolina House subcommittee head on over to Channel 7 News.