Payday bill falls short

New restrictions on payday lending in South Carolina are more noteworthy for how they fail to protect consumers than how much tougher they make things for lenders. There are some improvements, but the shortcomings are extensive.

After long debate, the Senate and House agreed Thursday on a bill to limit borrowers to one payday loan at a time. That's an improvement. Unfortunately, it wasn't accompanied by restrictions to deter serial borrowing that can leave already desperate people more desperate.

Efforts to enact a tougher bill were fought by a formidable and well-organized payday lending industry and its influential lobbyists. For example, the industry opposed a rule that would prohibit lenders from debiting borrowers' accounts electronically. The industry won.

Lenders opposed tying loan amounts to a borrowers' ability to pay them back, and instead fought for a $550 cap on loans for all borrowers. They won again.

That means someone in a financial jam — faced with a major car repair bill or medical emergency — can borrow $550 for two weeks at a cost of $70, regardless of his income. He pays back that loan out of his paycheck, then borrows again to meet his current expenses. The new rules allow him to borrow again, and again, getting deeper and deeper in debt.

The rules require a borrower to wait a day after repaying one loan before taking out another, but that's not long enough to break the cycle of debt.

Consumer advocate Susan Berkowitz of the Appleseed Legal Justice Center in Columbia said the state missed an opportunity to protect vulnerable citizens from predatory lending. She provided legislators with stories about real people and the extreme financial difficulties they endured because of payday loans. One of those stories came from Nancy Sineath, who related hers in a letter to the editor of The Post and Courier.

But there is one component of the new bill that provides some hope that the Legislature can eventually be shown the light. It requires a statewide database to track borrowers.

Ms. Berkowitz is confident that the data will show a significant number of people enmeshed in serial lending, getting in deeper into debt each time. Maybe when the Legislature sees those numbers, they will recognize the need for stiffer payday lending rules.

The industry has a lot of muscle in South Carolina. But that shouldn't decide how the laws are written. Insufficiently regulated, payday lending is a blight on those who repeatedly borrow so they can pay the landlord and put gas in the family car.