Payday Loans: The Regulatory Mess Continues

[Mar 19, 2009.]

 

Last week, this payday loans blog looked at regulatory failures in Ohio and Virginia. This week, it is reporting on legislators in three other states who are favoring hope over experience as they seek to control the industry.

Payday Loans in South Carolina

Last week a subcommittee of the South Carolina Senate passed a bill that--if ultimately enacted--would restrict the amount that individuals could borrow, and would introduce a cooling off period between loans.

A spokesperson for Advance America, the nation's largest payday lender, told The State newspaper that the new law could well spell the end for payday loans in South Carolina.

Loopholes in Georgia

Meanwhile, the Senate in Georgia has passed a bill that would attempt to close a loophole left over from a 2008 act that sought to outlaw payday lending. According to the Jacksonville News, borrowers who are trying to avoid the ban have taken to raising short-term advances by selling their home appliances online to companies who then rent the goods back to them at high rates.

Kentucky Lenders

Last week also saw the enactment of legislation in Kentucky that will establish a database so that state authorities can track payday loans. HB444 passed the House by 83 votes to 11, and is now with the governor.

Previous legislation had tried to restrict the amount, and number of loans that any one person can borrow at any one time. However, borrowers who use more than one lender could easily bypass the restriction, so a statewide database was seen as the only way to permit enforcement.

Oddly, the new law also prevents any new payday lenders setting up business in Kentucky for the next 10 years. Some believe that such a restriction is unlawful, and the Courier-Journal reports that a legal opinion has been prepared that says that the new act is unconstitutional. Kentucky's governor, Steve Beshear, is also said to have concerns about it.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.