One more chance to limit payday lending
May 27, 2008
State lawmakers still have an opportunity this session to put reasonable, meaningful limits on payday lending in South Carolina. While House lawmakers tried to let one bill die in committee, the Senate saw to it the House will get a chance to vote on the limits by attaching them to another House bill. A vote is expected this week.
Earlier this month, Rep. Harry Cato said he would let the bill die in a subcommittee of his House Labor, Commerce and Industry Committee. Sen. Robert Ford, a Democrat from Charleston, forced the issue by amending another House bill to include the payday lending restrictions. He also blocked action on any other House bills until after action on this one, The State newspaper reported.
The rules would limit lenders to making one loan at a time to any customer, would require a seven-day waiting period after a loan is repaid before a customer can take out another payday loan, and would limit the amount of loans to the lesser of either $500 or 25 percent of a borrower's gross income during the term of the loan.
These are the same regulations that passed the Senate earlier in the session, and they deserve approval.
It's unfortunate that senators had to circumvent a legislative road block thrown up by some House leaders to get this bill before the full House. Lawmaking works best when each bill gets an up-or-down vote.
This industry should be regulated more tightly. As of last year, 37 states had limits on payday lending and some, including Georgia and North Carolina, had banned the practice altogether. Even the federal government had enough concern about the practice to impose a 36-percent cap on interest rates for loans to members of the U.S. military.
Payday lenders offer short-term loans, typically for $300 or less. The lenders charge fees equal to annual rates that in some cases exceed 700 percent. Some of these lenders prey on people who are out of options, and the loans can create a cycle of debt that ends in financial ruin. The practice has been allowed in South Carolina since 1999.
While there is a market for this short-term loan product, reasonable regulations would protect the state's most vulnerable consumers.
Payday lenders contend that if the loans are too highly regulated the loans no longer will be a viable product. They also say that if the short-term payday loans no longer are available, some consumers would be driven to even higher-cost options such as overdraft fees, credit card late fees or unregulated Internet lenders.
Certainly government regulation of private business should not be taken lightly. However, payday lending can take a toll on certain segments of the community. Reasonable restrictions could be put in place that ensure the state's most vulnerable residents aren't trapped in a cycle of debt, yet preserve this industry's right to conduct business in the state.
These proposed restrictions would do that. They should be approved by the state House.
Source : http://www.greenvilleonline.com
