Don’t bother telling the payday lending industry that a bill it helped pass in the recently concluded 2008-09 legislative session could hurt hardworking South Carolinians. The industry’s lobbyists are probably still popping champagne corks.

On the heels of the session, the way payday lenders issue short-term loans in South Carolina is undergoing the most drastic change since the practice was approved in the state in 1999.

But against vigorous efforts to go farther, if anything it is a win for the industry.
On June 16, the General Assembly overrode a veto by Gov. Mark Sanford, turning a bill into law that will set up a statewide database to track payday loans and raise the maximum loan amount from $300 to $550. There will also be a one-day waiting period between loans.

Pushed out of North Carolina and Georgia, the payday lending industry finds a safe zone in the Palmetto State. The nation’s largest lender, Advance America, is headquartered in Spartanburg.

While some lawmakers fought hard for stricter regulations on the lenders here, others worked just as hard to water down the bill in favor of the industry. What resulted was a compromise.

It wasn’t enough, says Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center, a low-income advocacy group. “It was incredibly modest reform,” she says.
In the end, Berkowitz says, the industry’s lobbyists won the day. “I could not believe how many people were being paid [by the industry] to work on this bill … those who were registered [lobbyists] and those who weren’t,” she says.

Short of a ban, Berkowitz says she would like to see loan amounts tied to a borrower’s income, longer wait times between loans and a cap on the amount of payday lending debt a consumer can incur in one year.

Payday lenders say they meet a need for short-term credit that borrowers cannot get from banks. The industry also argues that, contrary to what critics claim, the majority of its customers do not get caught in a cycle of debt.
John Ruoff, director of South Carolina Fair Share, a group that fights for social justice, says the industry does trap borrowers in a debt cycle and targets military enlistees and other consumers of modest means.

The payday-lending bill doesn’t meaningfully address multiple borrowing, Ruoff says. “We’re still going to see people taking out loan after loan after loan,” he says. “They just won’t be able to do it on the same day.”

A star-studded cast of lobbyists worked as hard for payday lenders during work hours as they did after hours. Throughout the session they wined and dined lawmakers who would vote on the bill.

The industry also stuffed the campaign coffers of politicians and their political action committees, says John Crangle, director of South Carolina Common Cause, a nonprofit watchdog dedicated to an open and accountable legislative process.

Crangle is surprised lawmakers passed any payday lending regulations. “If they’d have settled [this] issue back in January, then the campaign contributions that came in in February and March, April and May would not have been received and that would have hurt the incumbent legislators who decide on this issue,” he says.

It could be years before another bill aimed at regulating payday lenders in South Carolina becomes law. In the meantime, industry watchdogs will keep an eye how the new rules affect those who use the loans.

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