by Corey Hutchins
Columbia Free-Times
Issue #23.06 :: 02/10/2010 - 02/16/2010
A business-friendly state that is home to the nation’s largest payday lender, South Carolina has for years played host to fevered controversy over how the dealings of high-interest, short-term lenders should be handled fairly. The festering debate has now found a new place to do its damage: the 2010 governor’s race.
On Feb. 1, new regulations went into effect that were supposed to curb borrowers from being able to carry more than one payday loan at a time by tracking loan balances with a statewide database.
Questions about how the industry will deal with the new procedures have embroiled the gubernatorial candidacies of Republican Attorney General Henry McMaster and Democrats Dwight Drake and state Sen. Vincent Sheheen.
Critics of the industry argue that lenders are exploiting a loophole in the law that keeps borrowers in a cycle of debt by only tracking new loans made after Feb. 1 — and not including any loans borrowers had previously taken out.
On Jan. 11, McMaster issued an opinion to the S.C. Board of Financial Institutions that the statewide database should not include existing loans. His argument was that borrowers shouldn’t be included in the database unless they had given consent.
Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center, says McMaster’s opinion knocked the teeth out of the regulatory law. Berkowitz and her organization have fought the payday lending industry for years.
“We will never know how many multiple loans are out there and how many multiple loans people are stuck with,” Berkowitz says of the way payday lenders are using the database.
The industry has always seemed able to find a way around regulations, Berkowitz says.
Sen. Sheheen has recently co-sponsored legislation to stop it.
The Camden Democrat hopes a bill he’s pushing will curtail certain payday lenders from skirting the law. In past legislative sessions, Sheheen was part of a coalition of lawmakers that wanted to tightly restrict payday lenders or ban the industry outright. He says he’s wary of how they continue to conduct their business in the Palmetto State.
“They have fought disclosure for a long time,” Sheheen says. “We finally were able to implement some tracking system … and it looks to me like they are again avoiding full disclosure.”
The ongoing payday lending debate has found fertile ground for further controversy in the current race for governor beyond the candidacies of Sheheen and McMaster. Democratic candidate Dwight Drake is a former lobbyist for the industry.
The Vietnam veteran and high-profile attorney, who in 2009 helped successfully sue Gov. Mark Sanford to force him to accept federal stimulus money for the state, has no qualms about his work for payday lenders.
“I worked as hard to do as good a job for them as I have any and all other clients,” Drake says.
Political observers have long pondered how the issue of payday lending would affect the governor’s race on the Democratic side. The recent dust-up over regulatory procedures has opened the door for such debate.
“I think this is a real question about the soul of the Democratic Party and who we will select as our nominee and whether or not we can stand up for working South Carolinians and [those] who have been preyed upon by this industry,” Sheheen says. “And I think it would be very hard for us to do that with their lobbyist as our nominee.”
For his part, Drake says he doesn’t recall Sheheen being all that involved in the payday lending debate last year. But right now his main focus is on jobs.
“The primary thing I would say is: If you don’t have a payday, you don’t have to worry about payday lending,” Drake says. “And we’ve got 266,000 people without a payday. I’m focused on doing all I can to bring jobs to this state so those 266,000 people can have a payday. Period.”
Regardless of how the issue affects the governor’s race, Berkowitz wants borrowers to know they cannot be thrown in jail or have their property taken away if a payday loan check bounces or they close their account.
Columbia Free-Times
Issue #23.06 :: 02/10/2010 - 02/16/2010
A business-friendly state that is home to the nation’s largest payday lender, South Carolina has for years played host to fevered controversy over how the dealings of high-interest, short-term lenders should be handled fairly. The festering debate has now found a new place to do its damage: the 2010 governor’s race.
On Feb. 1, new regulations went into effect that were supposed to curb borrowers from being able to carry more than one payday loan at a time by tracking loan balances with a statewide database.
Questions about how the industry will deal with the new procedures have embroiled the gubernatorial candidacies of Republican Attorney General Henry McMaster and Democrats Dwight Drake and state Sen. Vincent Sheheen.
Critics of the industry argue that lenders are exploiting a loophole in the law that keeps borrowers in a cycle of debt by only tracking new loans made after Feb. 1 — and not including any loans borrowers had previously taken out.
On Jan. 11, McMaster issued an opinion to the S.C. Board of Financial Institutions that the statewide database should not include existing loans. His argument was that borrowers shouldn’t be included in the database unless they had given consent.
Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center, says McMaster’s opinion knocked the teeth out of the regulatory law. Berkowitz and her organization have fought the payday lending industry for years.
“We will never know how many multiple loans are out there and how many multiple loans people are stuck with,” Berkowitz says of the way payday lenders are using the database.
The industry has always seemed able to find a way around regulations, Berkowitz says.
Sen. Sheheen has recently co-sponsored legislation to stop it.
The Camden Democrat hopes a bill he’s pushing will curtail certain payday lenders from skirting the law. In past legislative sessions, Sheheen was part of a coalition of lawmakers that wanted to tightly restrict payday lenders or ban the industry outright. He says he’s wary of how they continue to conduct their business in the Palmetto State.
“They have fought disclosure for a long time,” Sheheen says. “We finally were able to implement some tracking system … and it looks to me like they are again avoiding full disclosure.”
The ongoing payday lending debate has found fertile ground for further controversy in the current race for governor beyond the candidacies of Sheheen and McMaster. Democratic candidate Dwight Drake is a former lobbyist for the industry.
The Vietnam veteran and high-profile attorney, who in 2009 helped successfully sue Gov. Mark Sanford to force him to accept federal stimulus money for the state, has no qualms about his work for payday lenders.
“I worked as hard to do as good a job for them as I have any and all other clients,” Drake says.
Political observers have long pondered how the issue of payday lending would affect the governor’s race on the Democratic side. The recent dust-up over regulatory procedures has opened the door for such debate.
“I think this is a real question about the soul of the Democratic Party and who we will select as our nominee and whether or not we can stand up for working South Carolinians and [those] who have been preyed upon by this industry,” Sheheen says. “And I think it would be very hard for us to do that with their lobbyist as our nominee.”
For his part, Drake says he doesn’t recall Sheheen being all that involved in the payday lending debate last year. But right now his main focus is on jobs.
“The primary thing I would say is: If you don’t have a payday, you don’t have to worry about payday lending,” Drake says. “And we’ve got 266,000 people without a payday. I’m focused on doing all I can to bring jobs to this state so those 266,000 people can have a payday. Period.”
Regardless of how the issue affects the governor’s race, Berkowitz wants borrowers to know they cannot be thrown in jail or have their property taken away if a payday loan check bounces or they close their account.
