S.C. Senators Set Payday Loans Limits

South Carolina Senators Agree to New Limits on Payday Loans
February 19, 2008: 06:18 PM EST

NEW YORK (Associated Press) - South Carolina senators agreed Tuesday to limit payday loans to no more than $500 at a time and create a list of borrowers that businesses must check before lending money.

The tougher regulations would also double licensing fees for payday lenders, force borrowers to wait seven days after paying off one loan before they could take out another one and ban customers from having more than one outstanding loan at a time.

The bill must pass a final reading in the Senate before moving on to the House.

Advance America Cash Centers Inc., the Spartanburg-based industry leader, has been watching the debate here and similar legislation in Virginia. The company wants to avoid bans on payday loans in place in North Carolina and Georgia.

"Our whole point has been all along we're willing to work with folks on reasonable reform efforts that provide additional protections for consumers in South Carolina while protecting folks' access to this product," said Jamie Fulmer, a spokesman for Advance America Cash Centers. "What we can't support are efforts to regulate this product out of business."

The regulations approved Tuesday would:

• Double license fees, with the first payday lending office license costing $500 and subsequent locations $100 each. The higher fees would pay for law enforcement and consumer programs.
• Place a borrowing limit of $500 or a quarter of the income a customer would earn during a two-week period, whichever is less.
• Create a database that lenders must check to see if the borrower already has a loan outstanding.
• Ban the use of electronic fund transfers to pay off the loan. That means customers would have to come to the office with cash or a check.

For more than an hour Tuesday, Sen. John Hawkins called for a payday lending ban, saying the industry would find ways to slip around whatever regulations the state puts in place.

"We'll never be able to contain these people," the Spartanburg Republican said.

But others noted payday lenders, despite the expensive fees and past questionable actions, have a place for some consumers.

"I'm not trying to destroy a business," Sen. David Thomas, R-Fountain Inn, said. "I'm trying to bring their questionable practices under control."

Payday lenders are "filling a niche, aren't they?" Thomas asked Hawkins.

"What niche?" Hawkins shot back. "There's a niche for cocaine."

The industry essentially rents money by continually rolling over loans and incurring new finance charges each time for the state's working poor, said Hawkins, a lawyer involved in a suit against payday lenders. "Do we care about them or not?"