In the state of South Carolina payday lending is considered legal.
South Carolina has a $550 limit on the amount of a payday loan. One loan at a time is allowed. The maximum loan term is 31 days. The maximum amount of finance charges should not exceed 15% of the amount advanced. All criminal actions against borrowers are prohibited. There is a cooling-off period of 1 day between the loans.
Payday loans in South Carolina are still allowed. Unfortunately, they are also quite popular despite the law that the Legislature passed in 2009. It limited the number of loans to 1 at a time and set a $550 loan amount limit. Also, an online borrowers’ database was created and lenders were obliged to check it when they issued a loan to a new customer.
While the law was a half-measure and a compromise (since there were suggestions to ban the industry altogether), it was a good step into the right direction. Too bad, it was insufficient as payday lenders (as in many other states) managed to find loopholes in it. They took another name of short-term “supervised” lenders and went on operating. Nowadays, the number of payday lenders officially “dropped”. However, in reality, they simply made a shift to a different high-interest product and continue to thrive.
South Carolina Payday Lending Statutes
In the state of South Carolina, payday loans are considered legal according to S.C. Code Ann. 34-39-110 et seq., or “South Carolina Deferred Presentment Services Act“. Thus, in South Carolina, payday loans are legally called deferred presentment services.
All South Carolina lending companies wishing to operate as payday lenders must receive a license from the State Board of Financial Institutions. Also, the state law requires that upon entering a loan agreement, a written contract should be signed by both a borrower and a lender. The contract should disclose all the loan terms including the name of the lender, the date of the transaction, its amount plus all rates and fees.
“In order to prevent a person from having a deferred presentment transaction that exceeds the limit in Section 34-39-180(B) and Section 34-39-270(A), the Consumer Finance Division of the Board of Financial Institutions shall implement a common database with real-time access through an internet connection for deferred presentment providers.” (Section 34-39-175) This means that each lender is required to check whether a borrower is already in the database or not and whether their loan is repaid before issuing a new loan.
Loan Amount in South Carolina
- “The total amount advanced by a licensee to any customer at one time for deferred presentment or deposit may not exceed five hundred fifty dollars, exclusive of the fees allowed in Section 34-39-180(E)”. (Section 34-39-180)
Rates, fees and other charges in South Carolina
- “A licensee shall not charge, directly or indirectly, a fee or other consideration in excess of 15 percent of the face amount of the check “. (Section 34-39-180) This fee can only be legally imposed “only once for each written agreement”, meaning, not more than 15% for every single loan. It is forbidden to extend it.
- No roll-overs and extensions are allowed: “A licensee shall not renew or otherwise extend presentment of a check or withhold the check from
deposit, for old or new consideration, for a period beyond the time set forth in the written agreement with the customer.” (Section 34-39-180)
- However, there is a restriction for the NSF fees that should not exceed $10 for a check.
- It is also required that a borrower was presented with an extended payment plan for a 12-month period in case of inability to repay a deferred presentment transaction.
Real APR for payday loans in South Carolina can reach 391% (*According to the Center for Responsible Lending 2019: “Typical APR based on average rate for a $300 loan advertised by largest payday chains or as determined by state regulator, where applicable.”).
Maximum term for a payday in South Carolina
- Payday loans can be given for a period no longer than 31 days; no extensions are allowed above it.
- Criminal actions against borrowers are prohibited in the state.
The South Carolina State Board of Financial Institutions can be contacted in case of any payday loan issue or question.
The History of Payday Loans in South Carolina
- 2000s – Before South Carolina introduced payday loan regulations in 2009, more than 4 million loans a year were taken in the state.
- 2006 – The Military Lending Act effectively capped payday loans offered to the military at 36% APR. This federal law has no exceptions, thus, no lender in South Carolina is now allowed to offer loans to the military in excess of 36% APR.
- 2009 – South Carolina Legislation introduced South Carolina Deferred Presentment Services Act. It was the first payday loan law that was passed to help regulate the industry. It limited the number of outstanding loans to one, and set a limit of $550 for a loan. Also, it capped financial charges on any given loan.
- 2010 – However, the success was short-lived as payday lenders in the state promptly found the way to get around the law. The lenders simply abandoned their payday loan licenses and became short-term “supervised” lenders. In fact, this loan is very similar to a payday loan, however, it can presuppose collateral (a payday loan does not). Besides, supervised lenders are not subject to payday limitations and regulations. There is no set limit for either the term of a supervised loan or its interest rate. Also, lenders don’t care about checking borrowers via the database. In the result, out of 640 payday lenders that operated in 2010 nearly 100 were re-licensed as supervised lenders. (Alliedprogress.org)
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (the federal rule is expected in November 2020).
- However, as the time passes, it seems more unlikely that the rule will ever come into effect. There is no secret that Mick Mulvaney, a former South Carolina Congressman who got a great deal of support from payday lenders during his term in the Congress, wasn’t eager to enforce the CFPB’s rule. Neither is Kathy Kraninger, who’s leading it now, for that matter.
- Thus, payday lenders in South Carolina continue to successfully evade state laws and thrive.
(As of April 2019)