The S.C. House should follow the Senate's lead and vote to close a loophole some payday lenders are using to get around new rules that were enacted Feb. 1.
Some lenders, anticipating the start of the new restrictions, began switching their licenses to become supervised lenders. Supervised lenders can charge any interest rate as long as they are licensed, notify the state and post the rate. They can offer small unsecured loans for terms longer than a two-week payday loan.
Had one or two — or even 10 — payday lending locations switched licenses, few would have noticed. But after nearly 100 made the switch at the beginning of the year, lawmakers worried that in making the switch to supervised licenses, payday lenders had every intention to continue business as usual while escaping the new law passed expressly to regulate them.
Lawmakers are right to be concerned. Payday lenders have proven across the country that they don't intend to be regulated. As states have passed laws to limit the industry, lenders have found and exploited loopholes, including remaking themselves by changing their licenses. In some instances, they've continued to make payday-style loans while making only slight changes in their business models.
To read the complete editorial, visit The State (Columbia, S.C.).