State prepares to wage battle on payday lenders

Tuesday, 18 December 2007

Page 2 of 2 Sue Berkowitz, attorney and director of S.C. Appleseed Legal Justice Center, an advocacy and lobbying group for low-income South Carolinians, 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, (the payday lending industry) doesn’t want you to calculate it like an annual percentage rate but that’s what ends up happening over a year’s time,” Berkowitz said. “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 percent loan on her.” Berkowitz cited the number of payday loans written in the state each year as evidence that individual customers are taking out a considerable amount of this type of debt each year. From Sept. 1, 2004, to Aug. 31, 2005, payday lenders statewide 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% of adults are in the 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 each customer in South Carolina takes out are difficult to find because that data isn’t compiled statewide. “(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 S.C. Fair Share’s Ruoff. “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.” Seeking a solution A real-time database that would track lending in South Carolina is part of a bill currently in the state 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 can 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 consumers 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.” Holbert sought help for her debt through a local credit service three years ago and since then has been able to pay off nearly all of what she once owed. She also finished her college degree, bought her first home and purchased a car, but, she says, not without sacrifice and diligence. Holbert still visits the payday lenders sometimes but not to write a check. She simply stops in to remind herself of where she used to be and just how far she’s come. “Every now and then I drive by or walk inside because it feels good to resist the temptation,” Holbert said. “I know they’re there if I ever need them, but I don’t need them.” While Holbert was able to find a happy ending for herself, she says there is a need for lawmakers to better regulate payday lenders so others can avoid entrenching themselves in situations similar to what she experienced. Hawkins has declared that his primary goal in the upcoming session is getting a bill passed that would regulate payday lenders. If he succeeds, this could become part of Hawkins’ legacy as a senator—he announced earlier this year 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 >>