If the state Legislature refuses to take any steps to rein in the worst abuses of payday lenders, then local governments certainly are justified in doing what they can to control this often predatory practice.
Sensible payday lending bills were introduced in both houses of the General Assembly during the recently adjourned session, but neither bill ever came up for a vote on the floor. The bills were hardly radical. The Senate bill would have limited customers to one payday loan at a time, limited the number of loans borrowers could get in a year, capped interest rates at 36 percent and limited fees to $5 for every $100 borrowed.
Those measures might not have eliminated abuses altogether, but they would have helped reduce excessive fees and interest rates that often approach 400 percent. They also might have helped borrowers get off the treadmill of debt where they find it necessary to get new loans to pay for old ones.
Local governments have no real authority to enact such regulations and little means of curbing the industry's more egregious practices. But cities can use zoning restrictions to limit the number of payday lending outlets.
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Private lending institutions also can adopt policies that provide small loans at reasonable interest rates for customers who might otherwise patronize payday lenders. Those customers often are low-wage earners who have little collateral or credit history and who have few options when they need cash to take care of an emergency. Even with exorbitant rates, a short-term loan often is less expensive overall than a bounced check or a missed car payment -- as long as the loan is paid back on time.
The Rock Hill City Council recently approved new zoning regulations that would help control the number of payday lenders in the city. Under tougher zoning rules, new payday lenders would have to be at least 300 feet from residential districts, churches and schools, and at least 1,000 feet from similar financial businesses. Lenders also can't open in stand-alone buildings and must be located in shopping centers or supermarkets of at least 30,000 square feet.
In the private sector, Family Trust Credit Union, for one, has adopted what it calls Lifeline Advance, a short-term lending program designed to offer credit union members a line of credit at reasonable interest rates. Under the program, members can borrow up to $500 for 30 days at 18 percent interest and a $35 annual fee -- similar to the cost of a credit card. That's a maximum of $7.40 in finance charges per month, compared to traditional payday lending charges that can be as high as $15 in interest for every $100 borrowed.
We applaud Family Trust for providing a humane alternative to meet a real need for many of its members. We also support the city's effort to curtail the growth of payday lenders locally. City officials say 38 payday lenders now operate inside city limits, which is triple the number here six years ago.
Some states have banned payday lenders altogether. South Carolina lawmakers can't even enact reasonable measures to curtail lending abuses and spare customers from an endless cycle of debt.
We're grateful both the city and private institutions are willing to step up and do what they can to alleviate this problem.