Senate payday lending bill gets tougher

COLUMBIA -- The S.C. Senate voted Tuesday to curb payday lending, passing a provision even tougher than a compromise reached last week and coming close to considering a ban on the high-interest, two-week loans.

During four hours of debate, senators supporting a ban reminded colleagues that Georgia and North Carolina essentially have banned the industry, and other states are considering bans or strict limits.

Under the bill adopted by voice vote Tuesday, borrowers can hold only one loan at a time and must wait at least seven days between paying off one loan and taking out another with any lender.

The provisions are designed to break patterns of serial lending that critics say trap borrowers in a cycle of debt by using a new payday loan to pay off an old one.

Jamie Fulmer, spokesman for Advance America, a Spartanburg-based company that is the nation's largest payday lender, said the bill was better than a ban, but requiring seven days between loans "seems excessive."

"This is one step in a long legislative process," Fulmer said. "We expect the House will have their view as well."

The bill is expected to go to the S.C. House later this week.

State law allows a company to loan as much as $600 at a time to a borrower and charge $90 in fees for the two-week loan, the equivalent of a 390 percent annual interest rate. There is no monitoring by the state to prevent borrowers from taking out multiple $600 loans with other companies, and no waiting periods between loans.

The bill keeps the compromise version's lending cap. Borrowers cannot take out more than 25 percent of their gross income for the two weeks of the loan. Those earning more than $2,000 over two weeks would be limited to a $500 loan, the maximum allowed for any borrower.

To prevent borrowers from going from one company to another, the bill requires the State Board of Financial Institutions to keep a database of payday loans.

Tuesday's debate pitted two Republican senators from Spartanburg against one another, and divided members in ways defying party or geography.

Sen. Jim Ritchie, R-Spartanburg, introduced the industry-supported compromise and was joined by Darrell Jackson, D-Richland, and other Democrats who tried to fend off amendments stiffening the bill.

"A lot of the payday lenders are big contributors to the Democratic Party," said Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center.

On the other side was Sen. Joel Lourie, D-Richland, who proposed the seven-day cooling off period, and Sen. John Hawkins, R-Spartanburg, who spoke for more than two hours seeking a ban.

Hawkins reminded the Senate that the industry did not exist until the General Assembly passed a law in 1999 that enabled the companies to take post-dated checks that they could hold and use as collateral for repayment.

"We were gigantic suckers when they came to us," Hawkins said. "They knew what they were doing, and we didn't. And it's time now to pay the bill."

North Carolina, Georgia and other states have essentially banned payday loans in the last few years, and Hawkins said South Carolina should do the same.

The Senate voted 23-18 to table Hawkins' amendment to ban the industry.

"That was an incredibly close vote," Berkowitz said. "It shows the industry doesn't have quite as much strength as they thought they did."

Berkowitz said passage of a law limiting payday loans will require hard work in the House to overcome the payday industry.

"They're going to pull out all stops and try to weaken the bill, even weaker than the initial compromise," she said.