Now that Altria’s tar-and-nicotine-stained money have all but guaranteed that there will not be an increase in South Carolina’s largely symbolic 7 cents-per-pack cigarette tax, the dark side of the Force will again ascend as Darth Dem John Land aims his light sabre at payday lending reform.
While consumer advocates have been pressing for substantial restrictions on the organized crime of lending unfortunate people money they cannot repay at interest rates that would make a Corleone blush, the Dark Lord has consistently resisted. Instead, he and his consigliere, ex-Democratic-Senator-turned-payday-lending-lobbyist Tommy Moore, huddled in smoke-filled back rooms (still unbelievably cheap to fill up) to plot to undo a bi-partisan effort to but the brakes on this evil practice. And guess what? It worked.
The Senate is poised to accept a pseudo-reform pushed by Land and his pal Harry Cato. While the bill does stop multiple loans by limiting borrowers to one loan at a time, enforced by a third party database, it completely ignores the real issue: serial borrowing by cash-strapped consumers. Since 60% of the people who take out these loans cannot pay them back on time and meet their rent and utilities payments, they go back to the sharks for another go-around. In fact, a relatively well-paid single parent with two children making less than $46,000 would have to pay over half her take home pay to pay off the loan when it is due and avoid those extra fees. That’s why fewer than half of these loans are paid off on-time
Land and Cato would protect the usurers by allowing borrowers to take out 26 two-week $600 loans by permitting the re-borrowing of the same $600 every two weeks. The industry loves to point out that these loans don’t carry interest rates, they carry “lending fees,” as if that excused the criminally high costs. So the industry approved “reform” bill permits a payday lender to charge a desperate borrower $2340 in “fees” annually on that same revolving $600 loan.