OPED: Payday lending loopholes need to be closed

COLUMBIA - Changes could be coming to our state’s sentencing laws as the Sentencing Reform Commission, which I have proudly chaired and is composed of three senators, three house members, three members of the judicial branch and the director of the S. C. Department of Corrections, has released our report with 24 recommendations. This commission has been meeting for over a year and unanimously voted to approve the package of recommendations. At a press conference we were able to present the report with members of the commission in attendance as well as key lawmakers.

The recommendations propose to ensure that high-risk, violent offenders go to prison and serve longer sentences; that there is consistency in what offenses are classified as violent and which are non-violent; that offenders who are released from prisons do not disappear into S.C. communities without any oversight; that current parole systems are strengthened through education and experience; that prison beds are not used by non-violent offenders who better perform under alternatives to incarceration; that a system of programs and services be put in place to address offender risk and needs to reduce recidivism, and that oversight continues to ensure performance with the objectives. You will hear more about this as legislation on each recommendation is being drawn up and will be introduced in the next weeks.

A Banking and Insurance Subcommittee, on which I am a member, passed out a bill that I have co-sponsored with several of my colleagues on supervised lenders. In 1998, the legislature enacted laws to regulate the payday lending and check cashing industry. Despite the intent of the bill, the industry has spent the past 12 years undermining this statue and doing all it could to entrap low-income borrowers into multiple and serial loans. As you will recall, the General Assembly passed a bill last year to control and regulate payday lenders.

Unfortunately lenders have found a loophole in the law and have taken advantage of this. The entire payday lending industry took the position that the statute did not limit a licensee to making one loan to a consumer at a time but rather only limited the individual contracts to $300. All lenders, from the multi-national, publically traded corporations to the one licensee operation, began making multiple loans to the same consumer, openly advertising, “We lend up to $600.” This is where the loophole is.

The payday lenders have repeatedly told the General Assembly that consumers are “few and far between” who have multiple loans with multiple lenders and that these loans are repeatedly flipped. Yet, when the Board of Financial Institution determined that all payday loans that were in existence on Feb. 1, 2010, must be enrolled in the data system, the lenders protested and forced the board to request an attorney general’s opinion. The attorney general unfortunately wrote an opinion agreeing with the lenders. By not having to enter existing loans on the database, the payday lending community can hide information concerning its former customs. They will be back to the same old practices.

The loophole that will allow supervised lenders to make short-term loans of less than 90 days must be closed. Approximately 93 payday lenders have turned in their licenses and have become licensed as supervised lenders. The bill before us will ban a deferred presentment licensee who changed its license to a supervised lender license if the lender continues to follow the former payday lending practices. South Carolina can no longer be intimidated by this industry that is bleeding and taking advantage of low income borrowers.

Thank you for allowing me to represent you as your State Senator. It is both an honor and a privilege. I will strive to do the best job I can for you. Please feel free to contact me on any issue. I would like to hear from you. I can be reached at my Hartsville Office at (843) 339-3000, or at my legislative office in Columbia, Post Office Box 142, Columbia, S. C. 29202, (803) 212-6148, or through my e-mail address geraldmalloy@scsenate.gov.