Payday lending bill is set for fast track in S.C. House

By Jim Davenport – The Associated Press

COLUMBIA — House leaders who last year killed efforts to regulate the payday lending industry have put legislation to do just that on a fast track.

Neighboring North Carolina and Georgia have banned payday lending during the past five years. But the industry has defenders in South Carolina, including Gov. Mark Sanford, House Speaker Bobby Harrell and Speaker Pro Tem Harry Cato.

With Harrell’s backing last year, Cato, then the longtime chairman of the House Labor, Commerce and Industry Committee, blocked efforts to bring tougher regulations of the industry to the House floor for debate after months of hearings in one of his subcommittees.

Now, Harrell, R-Charleston, and Cato, a Travelers Rest Republican, are the top sponsors of a bill that would limit consumers to taking out no more than one payday loan at a time for up to $600 dollars and force lenders to check a state database before granting loans. Lender fees would be used to set up and operate the database, which would instantly report when loans are made.

The bill’s third top sponsor is Rep. Bill Sandifer.

That lineup “communicates the importance of this legislation to the leadership of the House of Representatives,” said Sandifer, R-Seneca. Beyond them, the bill has 72 co-sponsors among the House’s 123 current members.

Sandifer expects the bill will be on the House floor for debate in a couple of weeks and said there’s no need for lengthy discussion beforehand.

“I think that we’ve come up with a bill that meets most people’s expectations,” Sandifer said.

The database “creates a mechanism to track and make sure they don’t have more than one loan at a time,” Cato said. That should break a cycle of debt created as people who can’t pay loans repeatedly renew them, racking up additional fees. Lenders are allowed to charge $15 for every $100 borrowed for the loans that have to be repaid in two weeks.

For people who can’t pay loans on time, lenders will be able to create payment plans that aren’t allowed under current law.

It’s one of several areas of concern for John Ruoff, research director for South Carolina Fair Share, a group advocating for the state’s poor.

“As it’s drafted, it’s woefully inadequate,” Ruoff said. “All it really does is limit a payday lender to one loan at time. … And it raises the amount of the allowable loan from $300 to $600 dollars.” The loan repayment plan doesn’t spell out how long the payments can last or if they’ll clear the lender to borrow more money.

Cato said it should be up to the lender to determine how long payments should last. And Harrell said lenders won’t be able to offer additional loans to a consumer making payments on a payment plan.

Ruoff liked better the bill passed by the Senate last year that included a waiting period before people could get a new loan.

With a handful of bills introduced already calling for a ban of the industry, Harrell, Cato and Sandifer expect efforts to kill the industry when the bill reaches the House floor in the next few weeks. But they say that won’t be successful.

“I think this is an option that consumers ought to have,” Cato said.

“The point is there is a niche this industry fills and lacking this industry, people would go down to the corner in bad neighborhoods and borrow money from people who might hurt them or they’d go to the Internet and do the same thing at considerably higher cost,” Harrell said.