State prepares to wage battle on payday lenders

Wednesday, 08 August 2007

Page 2 of 2 Fulmer refutes this idea, saying this type of borrowing is not typical and therefore the fee should not be calculated as APR. “On average our customers use our products seven or eight times a year,” Fulmer said. “Our customers are savvy enough to understand the cost of our product—and we exist because consumers like our product.” Sue Berkowitz, attorney and director of S.C. Appleseed Legal Justice Center said to not calculate the fees as APR is misleading and that in order to be fair to borrowers it must be considered as such. “You have to look at it as a percentage rate, especially if you look at people taking out serial loans. When you have someone taking out loan after loan after loan—they (the payday lending industry) don’t want you to calculate it like an annual percentage rate—but that’s what ends up happening over a year’s time. I spoke with a woman recently who had 16 loans and had been carrying them for months and months. You can’t tell me that wasn’t the weight of a 391% loan on her.” Berkowitz cited the exorbitant number of payday loans written in the state each year as evidence that individual customers are taking out a considerable amount of loans each year. From Sept. 1, 2004, to Aug. 31, 2005, payday lenders made roughly 4.1 million loans.  “For them to make 4.1 million loans in little ole South Carolina in one year ... well, there are 3 million adults in the state and we know that probably 90 percent of adults are in a banking system in some way. That means there are probably about 2.7 million checking accounts in the state, and you can’t tell me that every single adult in the state has taken out a payday loan—I know I haven’t taken one out. The only conclusion is that a small percentage of people are entering into multiple loans, financed over and over again,” Berkowitz said. Exact numbers on how many loans taken out by each customer in South Carolina is currently unavailable because a database containing that information does not exist. “They (the lenders) hold all the data,” Berkowitz said. “We want better data tracking in our state and if they’re unwilling to let us do that kind of collection, it makes you wonder what they have to hide.” In other states, research shows that a significant number of borrowers took out multiple loans in a single year, and also that some borrowers consistently have at least one loan at any given time. “About half (of borrowers), by industry funded research, have had many loans,” said Ruoff with S.C. Fair Share. “But even considering that the average borrower has had six to eight loans in a year, the median number of loans to a borrower is much higher. Close analysis of regulatory data in Colorado showed that 10 percent of borrowers had been in a loan every single day in a six-month period and that those borrowers generated one-fifth of loan volume.” A real-time database that would track lending in South Carolina is part of a bill currently residing in the Senate. Before administering a new loan, the lending agent would have to verify the customer’s loan status through the database. If the customer had any outstanding loans—or had exceeded annual loan limits—he or she would be ineligible for a new loan. Currently, the law caps payday loans at $300, but lenders allow customers to take out two separate $300 loans for a total of $600. There is no law in the state that sets a maximum number of loans a customer may take out at one time. The bill would limit the number of loans a consumer can receive to one at any given time and to five annually, but would raise the loan cap to $400. The bill would also mandate a seven-day cooling off period between the time a loan is paid in full and a new loan can be written. In addition, the legislation would require the lender to give the consumer a payment plan option if they cannot pay the loan in full. The bill was introduced last year and industry lobbyists opposed every component, including the database. “To illustrate how unreasonable payday lenders are, they don’t even support a database, which would simply keep track of loans,” said Sen. John D. Hawkins, R-Spartanburg. “I don’t think they can afford to have the public see how many people they have trapped in indentured servitude, basically.” Hawkins supports the bill wholeheartedly, he said, and has declared that getting it passed is his primary goal next session, which will be his last in the Senate. Hawkins announced recently that he will not run for office again. “It’s my intent to raise hell about it and let everyone know the truth. If we say it loud and long enough, people will have to see the truth,” Hawkins said. “I’m sitting in the heart of the home of Advance America. We used to have the Piedmont Interstate Fair here, but it’s now the Advance America Fair. These people are spending lots of money—they have a big PR campaign. They’re trying to ensconce themselves into the fabric of our state, but God help us if we let them do it.” << Start < Prev 1 2 Next > End >>