COLUMBIA --- With some payday lenders already finding ways around a two-week-old law meant to curb predatory lending, South Carolina legislators said Tuesday they'll try again to close loopholes and threatened to ban the industry if it doesn't cooperate.
Industry officials insist they're not circumventing anything.
Legislators passed restrictions in May that were meant to prevent payday lenders from ensnaring poor people into a cycle of debt. The law limited the number of loans to one at a time, of a maximum $550, and required lenders to check a new online database to ensure customers have no outstanding loans elsewhere.
"The ink wasn't dry more than a couple of days, and there they were, scheming again, figuring out a way to circumvent the bill," Sen. Joel Lourie, D-Columbia, said of the compromise approved on the last day of regular session.
The database was launched Feb. 1, the deadline under the law. According to senators and advocates for the poor, payday lenders are skirting the database mandates by recharacterizing their loans. They accuse companies of handing out payday-type loans under a "supervised" loan license, allowing them to set their own length and interest rate on unchecked debt, because their customers' names won't go in a database.
About 640 payday lenders operate in South Carolina. Nearly 100 others have been re-licensed as supervised lenders, according to the state Board of Financial Institutions.
A bill up for debate on the Senate floor would ban companies from doling out payday-type loans under a license for other kinds of loans, and set a 120-day minimum for loans under a supervised license.
Sen. David Thomas, the chairman of the Senate Banking Committee, said he'll try to close the loopholes one more time.
"If this fails, I think the next time, it's an all-out assault," said the Fountain Inn Republican, who is running for Congress.
He threatened to push for an outright ban, or to cap the annualized interest rate at 99 percent. He said that might sound astronomical until it's compared with payday lending's current underlying annual interest rate of nearly 400 percent.
Five states, including North Carolina and Georgia, and the District of Columbia have passed laws essentially eliminating payday lending, and about 10 states never authorized it to start.
Payday lenders said they have no problem with the new bill.
"It's like it's a solution looking for a problem," said Check Into Cash spokesman Ryan Harris. "A payday loan compared to a supervised loan look nothing alike."
The company has switched 24 stores statewide to U.S. Money Shops, which typically offer one-year loans averaging $800, with 144 percent annual interest, he said. The company supports the 120-day minimum, he added.
He said the company still has 66 stores in South Carolina operating as payday lenders, abiding by the database.
The company does background credit checks for U.S. Money customers, something it does not do with payday loans. Harris said that prevents people from taking out both types of loans at the same time.
Industry giant Advance America is not switching the licenses of its 140 locations statewide and has no position on the bill, said spokesman Jamie Fulmer.
He said the Spartanburg-based company would fight any effort to "regulate us out of business," maintaining that a $15 charge for every $100 borrowed on a two-week loan is cheaper than bounced check fees and other alternatives.
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