State Sen. John Hawkins filed the lawsuit Tuesday on behalf of Mark and Rebecca Morgan, of Horry County. Mr. Hawkins said he would seek to make the lawsuit a class-action.
"We allege in this case that the payday lenders have enticed borrowers to enter into unconscionable loans with little reason to believe the loans could be repaid," the Spartanburg Republican said.
The lawsuit names several payday lenders, including the nation's largest, Spartanburg-based Advance America. Spokesman Jamie Fulmer said the company was aware of the lawsuit but hadn't seen the details.
"We can't comment on the specifics of the case. We are going to defend our position strongly in court. We won't try it in the media," Mr. Fulmer said.
The company doesn't do anything illegal and "provides a needed service to consumers," Mr. Fulmer said. "Consumers have shown that this is a product that they like and use responsibly."
Mr. Hawkins said the Morgans are representative of a larger group. They were "in debt up to their eyeballs," he said, but would not provide specifics. He also would not make the Morgans available for an interview.
The borrowers are being "trapped into getting continuous loans to repay loans that should not have been made," with the lenders accruing fees and interest payments along the way, Mr. Hawkins said.
The suit also names Carolina Payday Loans; Check into Cash of S.C.; Check 'n Go of S.C. and Local Cash Advance of S.C.
It claims the lenders violated the Consumer Protection Code with negligent lending practices, "breached their obligations of good faith, and engaged in a civil conspiracy to make unconscionable loans."
Legislation to curb payday lending in the state was proposed but did not pass earlier this year.
The proposal would have limited loans to five a year, set the maximum loan at $400 each and require that borrowers pay off one loan before getting another.