Senate approves bill regulating payday lenders
Spartanburg lawmakers on opposite sides of banning industry
John Hawkins and Jim Ritchie sit next to each other in the Senate chamber.
But the two Spartanburg Republicans couldn’t be farther apart when it comes to payday lenders.
Hawkins, one of 13 lawyer-legislators involved in a class-action lawsuit against the industry, wanted an outright ban. Ritchie helped author compromise legislation that regulates payday lenders but allows them to stay in business.
Hawkins lost his battle, but might have won the war.
The Senate on Tuesday rejected a ban by a 23-18 vote, but clamped down on payday lenders by approving a bill that limits customers to one loan at a time, implements a seven-day cooling-off period between paying off one loan and receiving another and mandates an extended payback period.
The final product was similar to one Hawkins proposed a year ago, before he began pushing for a ban.
“This was a huge victory,” Hawkins said. “These regulations allow payday lenders to operate the way they say they operate instead of going out and trapping people in a cycle of debt.”
Jamie Fulmer, the investor relations director for Spartanburg-based Advance America Cash Advance Centers Inc., the industry leader, said he believes the Senate took the right path in regulating the industry rather than banning it.
“Our hope as we move forward and the legislation goes to the House is that we can work with folks over there and try to keep these businesses operating, keep our employees employed and keep giving consumers this option,” Fulmer said.
Payday lenders provide short-term loans, usually for two weeks, and usually charge $15 for every $100 borrowed.
Industry critics say the annualized interest rate, nearly 400 percent, is too high a price to pay. They also say that too many people get trapped in a cycle of borrowing more to pay off previous loans.
Supporters say the industry provides emergency cash for people who would have trouble getting it elsewhere. They point out that bounced check fees, if annualized, would be nearly 1,000 percent.
The legislation approved Tuesday also requires lenders to enter the names of customers into a database to ensure that a person doesn’t take out multiple loans; sets the maximum loan at $500 or 25 percent of a customer’s gross income for two weeks, whichever is lower; and prevents electronic funds transfers.
The Senate used Ritchie’s proposal as its starting point. His amendment would have had a two-day cooling off period and would have prevented consumers from taking out a second loan if they were at the maximum on their first loan.
Ritchie said he was pleased with the end result.
“We were able to put a strong bill together and move forward,” Ritchie said.
The Senate must give the bill third reading today; then it goes to the House.
Hawkins also proposed dropping the fee lenders can charge to $5 per $100, but that failed by a 23-19 vote. He also spent nearly an hour holding up a vote on Ritchie’s amendment, calling it a “liberal” plan that would put more money in the pockets of the lenders.
“They were kicked out of Georgia, kicked out of North Carolina, and the military told them, ‘No way, we care about our people,’ ” Hawkins said. “But here we are in South Carolina saying, ‘Come on, we’ll be a big sucker state for you.’ ”
Ritchie said he believed his legislation would have created one of the strongest laws in the nation to regulate the industry.
“This was one of the most restrictive bills in the country,” Ritchie said. “But never let the facts get in the way of a good exaggeration.”
Spartanburg Herald Journal
By Robert W. Dalton
February 20, 2008