Lawmakers are revisiting payday lending regulations, this time to close a couple of gaping loopholes unforeseen in the new regulatory legislation passed last year.
One portion of the fix seeks to stop payday lenders who now want to operate as supervised lenders by merely changing their business licenses. Those lenders can offer small unsecured loans over longer terms than the two-week payday loan.
The other portion attempts to force payday lenders to work out payment agreements with existing borrowers who could not be entered into the state's new electronic database.
The electronic database went into effect Feb. 1 and was designed to limit payday loans to one per customer, at a maximum of $550.
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Many payday customers, lawmakers are finding out, have multiple outstanding loans with more than one lender, and the database only allows a single entry per person.
During a Senate Banking and Insurance Committee hearing Wednesday, lawmakers were told borrowers run the risk of an avalanche of insufficient fund and returned check charges on top of their short-term, high-interest loans that are due, as payday lenders threaten to present to banks the checks they hold on the loans.
Sen. Vincent Sheheen, D-Kershaw, and Sen. Joel Lourie, D-Richland, will hold a news conference on the new legislation they are co-sponsoring to address the problems today at noon at the State House.
The bill, amended in committee, requires payday lenders to consider a borrower's ability to repay when working out an agreement and prohibits additional fees from being tacked on.
The legislation also prohibits payday lenders from presenting checks or electronic transfers made or written before the new payday lending regulation went into effect Feb. 1.
As for the license switches, lawmakers were told nearly 100 payday lenders in South Carolina have switched business licenses to become supervised lenders, which have their own set of state regulations.
The amended bill also would make the terms of a supervised loan be 120 days or more, so payday lenders that switch could not continue in the short-term loan business. And the legislation requires a supervised loan be secured by personal property, such as vehicle title, but that title cannot have an existing lien.
"We thought perhaps everything was solved last year, but payday lenders have remade themselves," said Sen. David Thomas, R-Greenville, the committee chairman.