Plan Advances For Payday Lending Restrictions

A plan to put new restrictions on payday lending in South Carolina moved forward after a Senate subcommittee passed a bill Thursday morning. The House has already passed a payday lending bill, but senators adopted a tougher version that's identical to a bill the full Senate passed last year. The House did not pass that bill.

The Senate version has tougher restrictions on payday lenders than the House's bill. Sen. Wes Hayes, R-Rock Hill, chairman of the subcommittee, says, "The first difference is this has a 7-day waiting period between loans. So if you get a two-week payday loan, you'll have to wait 7 days before you can get another one. And second, in the House bill, they put the limit at $600. Anybody could get $600. What we did in this bill today, we capped it at 50% of the person's income for the loan period. So if it's a two-week loan, it's 50% of their two-week income. That's the maximum they could borrow."

The House and Senate plans both limit borrowers to having only one outstanding loan at a time. The industry would have to create a statewide database to keep track of loans to make sure everyone follows that restriction.

Jamie Fulmer, spokesman for Spartanburg-based payday lender Advance America, says the Senate bill's 7-day waiting period is an unnecessary limit on customers. "You certainly don't have arbitrary limits on the number of times you can use your credit card," he says. "And so we think better reform is reform that specifically and directly addresses those consumers who misuse the product."

Sherry Russell was getting a payday loan Thursday afternoon. She thinks the 7-day waiting period between loans doesn't make sense and could cost her if she can't get a loan when she needs one. "That might cause some bills not to get paid, and if they turn off one of your services and then you end up having to pay a reconnection fee, then you owe more, you owe more money than you would have if you borrowed the money and just paid a few dollars to get it early," she says.

The Senate bill now goes to full committee. There, senators are likely to discuss amendments to put limits on the interest or fees payday lenders can charge. Right now, they charge $15 for a $100 loan. What disturbs a lot of consumers and consumer advocates, though, is that works out to an annual interest rate of 391%.

Fulmer points out that the $15 fee is for a two-week loan, so equating it to an annual rate is misleading. And he says it's still much cheaper than bounced check fees.

Georgia and North Carolina have both banned payday lending.