COLUMBIA, S.C. — South Carolina lawmakers are looking to limit sky-high interest rates on short-term loans, also known as payday loans.
In 2021, 45,000 South Carolinians took out more than 300,000 payday loans, according to the state Board of Financial institutions.
Small-dollar, short-term lenders can charge borrowers in South Carolina rates of up to 395%. That means if you borrow $100, you're paying $395 in interest alone.
“Many of the borrowers make between six and 12 loans. Sometimes people make more than 12 loans. And so people get caught up in that debt spiral and can't get out of it," said Sue Berkowitz with SC Legal Justice Services. "Until we have stronger consumer protections, we will continue to see these problems."
Berkowitz said it's mostly low-income people of color who are targeted by these loans.
According to consumer data, of 1.2 million short-term loans in South Carolina in 2021, 46% were "flipped" or "renewed."
A bipartisan-backed bill in the South Carolina Senate would bar short-term lenders from charging an interest rate higher than 36%. It's similar to the federal government's limit on loans to military personnel in 2006.
“We need to protect folk, while we allow businesses to make what will still be a handsome profit," said Berkowtiz.
Lenders who issue the loans argue the proposal would put them out of business and leave those who don't qualify for traditional bank loans without any options.
“I could not make a profit on loans less than $2,500. The risk is too great and the loss is associated with that risk," said Credit Central President and CEO Dan Walters.
If signed into law, South Carolina would join 19 other states who have imposed caps of 36% or less. Many others are still considering similar legislation.