"I think it will make it very difficult for any operator to continue operating in South Carolina," said Jamie Fulmer, a spokesman for Advance America Cash Centers Inc. The Spartanburg-based industry leader has seen its business shut down by legislation in other states, including North Carolina and Georgia.
The bill "places these arbitrary limits on consumers' ability to access these products," Fulmer said. With the economy in the tank and South Carolina running the second-highest unemployment rate in the nation, Fulmer said that will be bad for consumers who need emergency cash.
But consumer advocates and bill supporters say emergency cash loans can too easily turn into perpetual borrowing to simply refinance a loan and that lenders rely on repeated fee payments on loan rollovers for profits.
The bill sent to the Senate Banking and Insurance Committee Thursday clamps down on that, as well as on the maximum amount of a loan.
Under the legislation, consumers could borrow no more than $600 or 25 percent of their income. A state database would be set up to bar consumers from taking out multiple loans. And they'd have to wait seven days before borrowing again. Meanwhile, the industry will have to pay $500 to license each location, with the money going to regulatory and law enforcement efforts, including cracking down on Internet lending. Each licensed location would pay a $1,500 fine for a first offense, lose their license for a year on a third offense and permanently for a fourth offense.
The House last month passed a bill with no link to incomes and with a waiting period only after someone takes out 10 loans. In essence. the Senate adopted the same bill it passed last year with tougher regulation, but a broader range of penalties. That bill was killed by House leaders, who refused to allow it come to the floor for debate.
While Fulmer called the income limits arbitrary, it is routine for lenders to link lending decisions to income.
"We are absolutely thrilled that they have gone back to the Senate version from last year," said AARP lobbyist Teresa Arnold.
"Overall, this is a vast improvement - a huge improvement - over what the House did because it's looking at the real problem, which is a business model of lending more money to someone than they have the capacity to repay," said Sue Berkowitz, executive director of the low-income advocacy group South Carolina Appleseed Legal Justice Center.
But Fulmer said lenders don't do that. "The key point is that there's no lender that's going to knowingly provide somebody a loan that they think can't pay you back."
Fulmer said the bill's limits could mean people can't get the maximum $600 loan unless they make $60,000 a year.
"That doesn't help that consumer get their car fixed. That doesn't help the consumer deal with their immediate need," Fulmer said.
Fulmer doesn't mind the licensing and penalties. "We've always believed if there are providers of this product who are not strictly conforming to the state law, that, you know, they should be punished," Fulmer said.