With the economy in the tank, credit drying up and people struggling to make ends meet, it’s a good thing consumers can turn to payday lenders, right?
The last thing people need to do is allow these legalized loan sharks to get their teeth into them. If they think they’ve got problems now, they’ll be in even deeper, more dangerous waters if they opt for the low-hassle, fast cash offered by these predators.
Now, more than ever, state lawmakers must tighten up on payday lending. Congress and federal regulators, while working to reassemble the credit markets, are stressing the need to implement stronger regulations to protect borrowers — and the economy — against bad lending practices. The mortgage meltdown was driven by subprime lending that trapped people into rates and provisions they couldn’t handle. Yes, there were people who got themselves in trouble, but there also were many who were duped into bad loans by unscrupulous lenders.
The same kind of poor regulation and oversight that existed in that arena remains at work in South Carolina as it relates to payday lending and similar predatory businesses such as title lending. When the Legislature sanctioned payday lending in 1998, it adopted virtually no regulations to protect consumers and gave the agency that oversees the lenders no real authority.
Our country has learned the hard way that that’s a recipe for disaster. The mortgage crisis was partly fueled by greedy lenders who would do anything to make a buck, including make loans to people they knew couldn’t pay. That’s payday lenders’ business model in a nutshell. They make repeated loans to people who can’t pay and who often find themselves going from one payday lender to another to pay off an existing loan.
South Carolina’s lawmakers, who have been considering tougher restrictions on payday lending over the past few years, must handcuff this industry before it does far more damage than it already has.
To read the complete column, visit The State .