Proposed legislation would limit payday loans to $500
By JIM DAVENPORT Associated Press Writer

COLUMBIA - Payday lenders would have to check a database of borrowers before issuing a loan and could not lend more than $500 at a time under a bill being debated by the state Senate.

Supporters of the bill insist they are not trying to put payday lenders out of business. The industry is essentially banned in neighboring Georgia and North Carolina.

''The purpose as I see it, is to protect consumers from a cycle of debt from which they currently have little chance to escape,'' said Sen. Wes Hayes, who said he would only support a ban on the industry if the news rules don't work or the industry ignores them.

The bill would break a cycle of debt created when customers borrow and can't repay loans and turn to other lenders to get more money to pay off the original loan.

While the maximum loan amount would be $500 under the bill, the limit would also be tied to income, Hayes said.

A person making $10,000 a year couldn't borrow more than 25 percent of their income during the two-week loan period, or $76 in any single loan, the Rock Hill Republican said. The maximum loan would be tied to the income limit or $500, whichever is lower.

Borrowers also couldn't have multiple loans outstanding and would be forced to wait a full day before taking out a new loan.

Supporters of the industry say payday lenders give people access to emergency money when they have no other resources. They point to fees banks charge for bounced checks - sometimes over $30 regardless of the check amount - that if annualized would equal even higher interest rates.

Some lawmakers want even stricter limits on payday lenders. Sen. John Matthews said he had never heard of state regulators pulling a lender's license under the current regulations.

''I don't see it doing any good unless you've some teeth that they can enforce it,'' the Bowman Democrat said.

Gov. Mark Sanford hasn't looked at the current legislation in any detail. However, he has consistently supported better disclosures from payday lenders, spokesman Joel Sawyer said.

''We want people to have the maximum amount of information before they make what in some cases is a very bad decision,'' Sawyer said.

The Senate is expected to resume debate on the bill Tuesday.