COLUMBIA, S.C. — State senators are proposing a bill to protect South Carolinians from predatory loan practices.
The Predatory Lending Act will require all lenders to check the borrower's ability to repay the loan before approval.
"We're after the bad actors in this space. We're after the bad lending practices; we're after those whose business model is to make loans to people that they know can't repay them, to keep them lockdown in a debt cycle forever," Senator Tom Davis said.
Senator Davis proposed the Predatory Lending Act, which he said is designed to target unfair trade practices that are used by payday lenders, title lenders, and installment loan lenders.
"We recognize that the marketplace should be free by enlargement, but you can't be deceptive, you can't be unfair, you can't engage in techniques that are designed to fool people," he said. "You can't engage in practices that are going to lock people unknowingly into commitments that they're going to spend dozens of years trying to repay."
The bill would outlaw mailing unsolicited checks, debit or credit cards, especially those targeted to low-income areas.
Sue Berkowitz, the director of policy at the South Carolina Appleseed Legal Justice Center, said this bill will allow less confusion for those taking out a loan.
"We want people to have all the information in front of them because when its one sided, when everything is in tiny writing in language that you might have a finance or banking degree to understand or you have to have it explained to you, maybe it's not a good idea to for those practices to be out there," Berkowitz said.
Under the Predatory Lending Act, lenders must assess if borrowers can repay their loans. Berkowitz said this will decrease the debt cycle borrowers face.
"If somebody is afraid they're going to get sued over a finance loan or over a payday loan they may say ok I won't pay my rent his month or I wont pay my utilities this month, I just won't buy all the food that I need or I'm just not going to buy my medicine this month because I need to make sure I don't get sued. It has a domino effect," she said.
Senator Davis said he wants to hear from all sides, including the payday lending industry, to ensure the legislation doesn't have unattended consequences.
"Based on our sister states and what've they've done and what the experiences there have been, we can make a reasonable assumption that here in South Carolina, putting good faith, fair regulations that avoid individuals being trapped in a cycle of debt that that isn't going to dry up the credit access," he said.