Payday lenders might be reined in South Carolina

Posted by Kendall Harmon

Borrowers could have only one payday loan at a time worth $500 or less under state legislation aimed at tightening restrictions on an industry some say traps clients in a cycle of debt.

The Senate sent the legislation — after closely defeating a proposed ban on the industry — to the House for consideration.

"I am not pro-payday lending or anti-payday lending," said Rep. Wallace Scarborough, R-James Island. "I am trying to do the best for the people of South Carolina. I am trying to help reach a compromise. I think people are shortsighted if they say we need an outright payday lending ban."

Payday loans are small, short-term, unsecured loans that borrowers promise to repay out of their next paycheck or regular income payment, according to the Federal Deposit Insurance Corp.

Scarborough, a member of the House committee that will first review the Senate bill, said the Legislature should find ways to "clean up the industry." The lenders, he noted, serve a purpose for people who need the types of loans not available at banks.

Read it all.

Filed under: * Economics, Politics • Economy • * South Carolina

3 Comments
Posted February 26, 2008 at 10:10 am [Printer Friendly] [Print w/ comments]



1. Wilfred wrote:

Pay-day lenders are exploitative.  But does the government really help things by “reining in” these lenders, so that the Mafia becomes the only source of borrowed funds for the poor &/or prodigal?

February 26, 12:08 pm | [comment link]
2. Rick in Louisiana wrote:

My spouse for several years worked for the state government office responsible for regulating money lending institutions - including payday loan businesses. Do people understand what the effective annual interest rates is on such loans? (People are not alarmed by say 3% per month - but how much is that per year? and would they tolerate such rates if they were expressed that way?) And - dare I bring it up? - the effective annual interest rate on a host of other loans… such as “early tax rebate” loans?

In graduate school I wrote a research paper on debt/loan patterns in the ancient Near East (specifically the ancient city of Nuzi - about 14-15th centuries B.C.E.) for a course on ancient agriculture. One of my (unlooked for) conclusions was that some people clearly got into never-ending cycles of debt. They borrow money (grain/oil) from someone (often a fellow named Zi-ke)… the next year take out another when they have not paid back the first one… with interest rates that would make payday loan businesses blush… I found one could often trace individuals and their levels/cycles of debt worsening year after year. Truly amazing.

February 26, 3:09 pm | [comment link]
3. Wilfred wrote:

Sometimes the problem is a lack of education for those that get caught in this trap, and sometimes the problem is a lack of discipline. 

But sometimes getting a pay-day loan is a rational decision.  If you need $500 to get your car fixed, so you can commute to your minimum-wage job, maybe 3% per month is worth it for a short time.  And if the nanny-state says, sorry, you can’t borrow any more, our rules say you’re maxed-out, what do you do?  Borrow from Guido at 10% a week.  In such cases, well-meant legislation actually hurts the poor.

February 26, 4:27 pm | [comment link]
Registered members must log in to comment.



Next entry (above): Chuck Collins Writes His Parish: Realignment update

Previous entry (below): The Full Pew Survey on Religious Affiliation and Life in America

Return to blog homepage

Return to Mobile view (headlines)