A Good Intentioned Bill Needs Fixing

Examining the Flaws in South Carolina's Predatory Lending Legislation

5 mins read
Predatory-Trade- Practices-Act

Even the most well-intentioned legislation has its flaws.

Protecting consumers against predatory lending is a worthy cause. However, the bill sponsors say will do that, Senate Bill 910, goes too far and could even make it harder for economically marginalized communities across South Carolina to access financial resources. Lawmakers need to go back to the drawing board and rework the “Predatory Trade Practices Act.”  

Although the bill was deemed “dead” by South Carolina Public Radio, S 910 is awaiting a full Senate vote after being reported favorably out of the Senate Labor, Commerce and Industry Committee. However, our state’s legislature has many more months in session, and no bill is truly dead until crossover deadlines (April 10) or adjournment (May 9). Though the bill may not be speeding through the legislature, if it does continue through, it must be significantly amended before passage.

Responsible lending principles inherently include evaluating a borrower’s “ability to pay,” including their income, employment, debts, and credit history. Issuing a borrower a loan they cannot afford would be mutually detrimental to the lender and consumer. Yet the bill’s “ability to repay” requirement does not even meet the current standards that ethical and responsible traditional installment lenders already follow in the state. Why pass legislation that lessens standards already being followed?

On top of that, the “ability to repay” proposal does not cover payday, auto-title, or online lenders – the types of predatory lenders the bill supposedly is intended to regulate. Seemingly doubling down on providing unhelpful loopholes, the bill also does not require banks or credit unions to adhere to the bill’s requirements, and many banks and credit unions in the state market loan products that would be considered predatory, such as loans secured by bank or savings accounts and teaser interest rates. If policymakers think their bill is going to be good for consumers and South Carolina financial services businesses, why doesn’t the bill apply to all lenders?

Worse, this bill as written doesn’t ensure consumers have access to fair and ethical credit products. Using U.S. Census data to identify impoverished areas of the state, the bill would ban the marketing of credit products to South Carolina households in those communities. This would cut off more than 45 percent of South Carolina households from reliable installment loans they rely on. In other words, in one neighborhood, residents would receive information about new credit products or convenient lending services, and folks just a few blocks away would not. Such policies may be legal, but they would clearly perpetuate financial inequality.

The National Black Caucus of State Legislators (NBCSL) has previously recognized the importance of traditional installment lending and outlined what safe and affordable lending means for those who are unbanked or underbanked or who have less than perfect credit. They have assisted with three resolutions that have been ratified over the last decade to address these types of issues.

The NBSCL resolutions emphasize the need for small dollar credit throughout the country, that not all loans are equally safe and affordable, and that the structure of a loan is key. The most recent resolution ratified in 2021 ensures true safe and affordable lending practices that provide financial empowerment to communities. That’s the type of true consumer protections South Carolinians need.

The “Predatory Trade Practices Act” without amendments is unworkable and bad policy. It will fail to protect consumers from predatory practices, create unfair lending practices within the industry, and will actually hinder South Carolinians from getting the credit they need and deserve. There needs to be equal application of rules in the marketplace, with a goal of providing more access to those that need it. We can and must do better.

Michael Bailey, a trailblazer in the field of photojournalism and a profound political writer, possesses the exceptional ability to distill complex political issues into accessible narratives that resonate with readers of all backgrounds. As the vanguard of the editorial team, Michael not only serves as a new media correspondent but also showcases his distinct talent as a photojournalist. His portfolio is a testament to his expertise in crafting news stories and intimate profiles that vividly portray the cultural, social, economic, and political journeys of minorities, both in South Carolina and beyond. With a rich tapestry of experience spanning media, business, and politics, Michael has emerged as a highly regarded voice and a sought-after commentator, offering invaluable insights into the challenges faced by people of color.

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