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South Carolina House Passes Payday Loan Legislation

Filed under: Regulation, South Carolina — Ryan Fiore at 3:46 pm on Thursday, February 12, 2009

South Carolina legislators gave overwhelming key approval to a bill aimed at preventing residents from being trapped in a cycle of debt through payday lending.The proposal, approved 93-16 yesterday, stops consumers from taking out more than one loan at a time, and puts limits on the size of loan they can take out up to $600. It also uses on online database which instantly reports when a payday loan is taken out. Lenders must check it to ensure customers don’t have outstanding loans elsewhere.

South Carolina is one of 35 states that allows any form of payday or cash advance loans. Some states have cracked down on payday loans in recent years, often by putting caps on interest rates, usually at 36 percent or less. The industry has been practically outlawed in neighboring Georgia and North Carolina. In Pennsylvania and Arkansas, such caps led Advance America Cash Advance Centers Inc. to close some stores there in 2007 and 2008.

In South Carolina, lenders charge $15 for every $100 borrowed on a two-week loan. The bill requires the industry to let customers go into an extended payment plan if they can’t meet that deadline, without incurring any extra fees. The bill requires another perfunctory vote in the House before heading to the Senate. That chamber approved industry restrictions last year in a bill that died in the House.

Critics said the bill did not go far enough in stopping the industry from preying on the poor. But supporters argued people sometimes need a temporary infusion of cash, and putting the industry out of business would only drive them to loan sharks and online, unregulated lenders. “I believe we’ve done the best we can,” said Rep. David Mack. The real-time database means “literally, a person cannot go into one payday loan entity, walk across the street after getting one and get another. That’s been the main problem - multiple loans.”

To read more about SC lawmakers approve payday lending regulation head on over to Forbes.

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