COLUMBIA — On Tuesday, January 9, 2024, Senator Tom Davis (District 46) of Beaufort introduced Bill S. 910 to curb predatory lending practices in South Carolina. According to Senator Davis, “In South Carolina, there are lenders that offer payday, installment, and auto-title loans that mine and use personal data to identify, target and then trap vulnerable South Carolinians in a cycle of debt. These lenders’ cynical business model is to make loans to people who cannot afford them, collect interest payments from them at obscene interest rates – often more than 150 percent per annum – and then refinance the principal repeatedly so the payments of ‘interest’ – or what illegal loan sharks would call the ‘vig’ or ‘vigorish’ – never stop coming. And in doing so they often use unscrupulous marketing tactics such as mailing live checks that, once endorsed and deposited to someone’s account, become very expensive loan obligations. These business practices intentionally prey upon South Carolina’s most economically vulnerable citizens and need to be stopped.”

Senator Davis’s effort is backed by the South Carolina Fair Lending Alliance, a coalition of faith leaders, non-profits, former payday and installment loan borrowers, and other citizens. The Alliance has been working to get common-sense consumer protections enacted since 2020. “We know that these high-cost, predatory loans not only impact borrowers but also their families, employers, non-profits and the state economy.” shared Alliance Lead Organizer Susan Stall. “Data shows that these loans are causing extreme financial distress from delinquent debt, loss of the family vehicle, and bankruptcy.”

A recent study by Coastal Carolina University’s Edgar Dyer Institute for Leadership and Public Policy estimates that in 2022 more than 400,000 South Carolinians had installment loans that were more than 60 days past due. Data provided by the South Carolina Board of Financial Institutions (BOFI) reflects that in 2021 and 2022 over half of all installment loan volume came from loan renewals.

The harm in ‘flipping’ or renewing loans is that interest is highest at loan origination, so any payments made in the early months of the loan go entirely to interest. When loans are flipped, they include new fees, insurance premiums along with the original loan proceeds thus creating a never-ending cycle of debt.

BOFI data also shows that between 2019 and 2021 40 percent of all payday loan borrowers took out between six and 12 loans per year.

While efforts to reduce predatory lending practices have been active for three decades by organizations like SC Appleseed Legal Justice Center, there is a renewed call for reform in the state. Bill supporters will gather in the Statehouse Rotunda for a press conference to include Senator Tom Davis on Wednesday, January 10 at 9 a.m. followed by a Senate Subcommittee hearing at 10:00 a.m. in Room 105 of the Gressette Building. The hearing will also be livestreamed.