An analysis of 12 million payday loans reveals troubling, but not surprising, trends in the lucrative industry.
For example, about half of all payday loans are made to people who extend the loans so many times that they end up paying more in fees than the original amount they borrowed.
The high-interest, short-term loans, usually for $500 or less, can draw customers - often people who are in desperate financial straits - into a cycle of increasing debt.
The Consumer Financial Protection Bureau based its findings on 12 million payday loans in 30 states during 2011 and 2012. Its conclusions mirror what has happened to people who in South Carolina who can least afford it.
It works this way: Someone with poor credit has an unexpected expense. The car breaks down or he gets sick and misses work. He borrows $500 to keep the lights on and groceries on the table. But he can't pay it back in the two-week period he agreed to, so interest - sometimes in the three digits - kicks in and starts growing his debt.
In 2010, South Carolina's laws changed in an attempt to protect consumers from being trapped in a spiral of debt due to payday loans. It capped loans at $500 and required a borrower wait a full business day between loans. When he gets to his eighth loan, he has to wait two days.
Sue Berkowitz, director of S.C. Appleseed Legal Justice Center in Columbia, which advocates on behalf of low-income people, says the law has helped reduce the number of loans in South Carolina - at least the number her group knows about.
But the cost is still great. She says that borrowers in this state pay more than $100 million a year in fees associated with the loans.
Clearly the law intended to rein in the insidious effects of payday loans has fallen short.
The payday loan industry is wealthy and has a powerful lobby. Toughening the law won't be easy, but it's the right thing to do.
Mrs. Berkowitz noted that South Carolina isn't alone. A few states have outlawed payday loans altogether, and some have limited the amount of interest that can be charged.
But overall, people in financial jams who feel they have no other place to turn still turn to payday loans that often get them deeper in hot water.
There has been talk, she says, of federal regulations for the industry. That notion is unlikely to get much support in South Carolina where additional federal regulation is generally viewed with a healthy suspicion.
But the fact that it is even a topic of conversation is an indication that payday lending practices here and elsewhere need close examination and additional restrictions.
South Carolina made some modest improvements with its 2010 law.
That should encourage the Legislature to take up the issue again and aim higher.
The longer things stay the same, the more people will pay the price.
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