Friday May 15, 2009

With more South Carolinians seeing their income drop, if not disappear altogether, more are vulnerable to predatory lending. The Legislature should stop dancing to the tune of the payday lending industry and pass legislation to protect its citizens adequately. At present, things don't look promising. The Senate is debating a bill that would improve things only marginally. The House-passed bill is even worse for consumers.

The payday industry, however, would benefit. That also would be good news for the army of lobbyists who reportedly have been working on its behalf. Sue Berkowitz, director of the Appleseed Legal Justice Center, a consumer advocacy organization in Columbia, tells us that she has counted 33 people lobbying for the industry — some registered and some not. There are only 46 senators.

The Legislature should defy those lobbying efforts, and vote on a bill that will provide more protection for constituents. Otherwise, consumers who are down on their luck will continue to go to payday lenders who charge interest rates that approach 400 percent annually. Too often, borrowers aren't able to pay back the loans and become trapped in a spiral of debt.

Last year, the senators got it right. They passed a bill that would have limited payday loans to 25 percent of a person's income for the period of the loan, or $500, whichever was less. It required a seven-day cooling-off period between loans, and limited borrowers to one loan at a time. Payday lenders hated it, and the House wouldn't consider it.

Some in the Senate pushed, with no success, for those same terms this year. Instead, the Senate bill would increase the current loan cap, and require only a two-day cooling-off period between consecutive loans. The even weaker House bill would double the loan cap at $600 and limit borrowers to one loan at a time. But it effectively allows serial lending. And loans could be made regardless of the borrower's ability to repay.

Legislators should approve real protections for state consumers. They shouldn't pass a bill that masquerades as reform, while actually encouraging payday lending abuses. If the Legislature can't be on the side of consumers in a year when growing numbers of people are feeling financially desperate, then when?

Source: http://www.postandcourier.com/news