S.C. Statehouse Report
Sunday, March 11, 2007
VIEW: http://www.statehousereport.com/columns/07.0311.lending.htm

Something's got to be done about payday loan business
By Andy Brack, Publisher

MARCH 11, 2007 -- You can hardly drive down a major road without bumping into a payday loan office. They're as ubiquitous as fast-food restaurants, billboards and neon signs.

But it's the numbers on the payday loan business that tell a revealing story.

Since 1999 when the industry was allowed in South Carolina, it has grown into more than 1,100 payday lending offices that offer upwards of 4 million small loans a year. In fact, South Carolina borrowers paid almost $150 million in finance charges through the end of June 2005, according published reports that cite the SC Board of Financial Institutions.

Across the nation, payday lending - - providing short-term loans of up to $600 with a charge of $15 per $100 - - has become a business with $6 billion in revenues and 22,000 locations.

Translation: Payday lending is a big business. Lenders say they're providing a needed service, which is obvious because people are using them. Critics say the finance charges paid by mostly low-income people who need a little help between paychecks can reach the equivalent of 390 percent. They say it amounts to "predatory lending" because the industry preys on people by getting them locked into a cycle of debt.

Consumer advocates in South Carolina and across the nation have raised more attention to the industry in recent weeks. In turn, that's prompted a $10 million publicity blitz by the payday lending industry to urge people to be more responsible in their personal financing. In other words, they are implementing a public relations campaign to woo the public into being more responsible. (Sound like a similar strategy cigarette companies used to use?) But they're also undertaking a lobbying effort at Statehouses to urge regulators to leave them alone by offering assurances that they can self-police the industry.

In South Carolina, 83 Democratic and Republican lawmakers have co-sponsored a bill introduced by SC Rep. Alan Clemmons, R-Horry, that would limit payday loans to a 36 percent interest rate and to one per customer. Clemmons modeled his legislation after a federal law signed last year that limits interest charged to military personnel to 36 percent.


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Despite seeming overwhelming bipartisan support, House Labor, Commerce and Industry Chair Harry Cato, R-Greenville, says there doesn't seem to be a lot of legislative steam behind getting something done this year because it's not a number one issue for most lawmakers.

One big issue is whether the $15 per $100 charge by payday lenders really is exorbitant interest or just a fee paid by borrowers. Cato and others point out that if it is considered interest, then comparable interest rates for something like a $35 bounced check charge can soar well above 390 percent.

Sen. David Thomas, the Greenville Republican who heads the Senate Banking and Insurance Commission, said he's ready and willing to take on payday lending. But if the industry's practices are examined, the Senate won't single out one industry. Instead, it would take a look at broader fee regulation, which could bring into focus an array of practices by banks, title loan companies and more.

"If it comes through my committee, there's going to be an even-handed approach - and I see no takers," Thomas said.

What he means is that banks, which might want to put payday lenders out of business by quietly supporting reform efforts, might not be so quick to criticize if they realized that high fees on some of their services might also come under scrutiny.

"Nobody has come to me on that challenge," Thomas said. "But the talk is good when they talk about one industry."

Bottom line: The excesses and predatory lending by some in the payday lending arena are rightfully being castigated by consumer advocates. But until lawmakers start hearing more on real reform for the industry - - and the lending industry as a whole - - don't look for a lot of change anytime soon.

You can reach Andy Brack, publisher of SC Statehouse Report, at brack@statehousereport.com.

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lighter side
A roller coaster ride

Another great cartoon by Bill McLemore:

3/4: Barnwell already received assistance

To the editor:

Thank you for your article highlighting the fact that South Carolina’s credibility is on the line with the Barnwell “Dump” bill. It’s important to note that Barnwell County has received ample dollars to prepare for reduced income after 2008. In 1986, $9 million in surcharges were earmarked for Barnwell County for the expected transition to the Southeastern Compact in 1992 (which never occurred). The current law was the result of the Nuclear Waste Task Force appointed in 1999 by Gov. Jim Hodges.

Sen. Brad Hutto and Rep. Lonnie Hosey represented Barnwell County on the Task Force and all stakeholders agreed to a gradual roadmap to prepare for a reduced, break-even operation after 2008. Connecticut and New Jersey paid $12 million when they joined the Compact to create an Economic Development Fund for Barnwell and $10.5 million has already been spent. In addition, Barnwell has received $2 million annually since 2000, another $12 million to date. This $24 million represents almost $1 million per job that may be lost when operations are scaled back after the Compact. (51 full time jobs may be reduced to 25 after 2008)

A fair question to ask Barnwell if once again the Compact is broken is whether or not it intends to repay the citizens of South Carolina for the dollars already accepted as “pay off.”

-- Ann Timberlake, Executive Director, Conservation Voters of South Carolina, Columbia, SC

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Just a quick note to let you know how you missed out this week. If you were a subscriber to the paid edition of Statehouse Report, you would have received the information below on Friday AND you would have gotten other special features:

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Budget battles begin
From the paid-subscriber issue of Statehouse Report

MARCH 9, 2007 -- The $7.3 billion budget prepared by the House Ways and Means Committee has garnered much general support from House and Senate members alike, with a few detractors. Hailed by those in the Senate for removing a cigarette tax increase from the table by spreading new recurring and non-recurring funds throughout the budget, the proposed House plan does three big things.

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