Senate considers payday lending compromise

By Jim DuPlessis - Jim DuPlessis

Rock Hill's Hayes expects amendments to bill today

A campaign begun last year to limit payday loans will face a critical test today as S.C. senators debate a compromise that has grudging support from both finance companies and consumer advocates.

The bill would allow payday lenders to earn their same high fees, but reduce both the amount and number of loans to any single borrower an effort to stop serial borrowing.

Payday lenders have been pushed out of Georgia and North Carolina, and they're fighting strict limits this year in Ohio and Virginia.

In South Carolina, the Senate bill allows the industry to survive, but within stricter limits, said S.C. Sen. Wes Hayes, R-Rock Hill, who worked out the compromise.

State law allows lenders to make as much as $600 in loans and charge $90 interest for two weeks, the equivalent of a 390 percent annual interest rate.

The new law would limit the loan amount to the lesser of $500 or 25 percent of the borrower's two weeks of income. The loan would be recorded in a database, and the borrower could not take out another payday loan until two days after paying off the previous one.

Cycle of debt

Hayes opposes payday lending, saying it creates a cycle of debt, but he said he supports this compromise as having the best chance of survival.

Measures considered last year would have made payday lending a crime or limited interest rates to 36 percent, a rate the industry said would be the same as a ban.

Sen. Jim Ritchie, R-Spartanburg, who will introduce the compromise amendment, said banning payday lenders would spawn more problems as individuals struggle to find quick cash. "Any ban would drive people to the Internet for payday lending, and there they wouldn't be regulated at all."

Jamie Fulmer, spokesman for Advance America, the country's largest payday lender, said the Spartanburg-based company will not oppose the bill, and supports "reasonable efforts" to reform the industry in legislatures across the country.

Payday lending foe Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center, credited Hayes for forging the compromise, but she said accepting it was difficult. But even if it passes the Senate, it faces more obstacles in the House.

Hayes said the bill is likely to attract a host of amendments today, both to weaken and strengthen it. But, in the end, he hopes the Senate will vote to approve the bill on this, its crucial second reading. A bill's third and final reading allows no amendments and is usually a formality.

The bill could be killed outright in a floor vote, or killed by the clock if it is tabled or sent back to committee, Hayes said. If that happens, "any progress we made this year will be lost, and we'll have to start over on it next year."