The South Carolina Legislature overrode Gov. Mark Sanford's veto of new regulations on the payday lending industry amid threats they'd come back later and get tougher or ban the business outright.
It was the best known of 10 bills Sanford vetoed after the Legislature wrapped up a recession-shortened session last month. Sanford didn't muster the one-third vote needed for any of his vetoes to stand.
Sanford's veto said that in the midst of recession that people needed access to borrowed money, that the payday lending industry should not be singled out for tougher scrutiny and the database the bill created would give rise to privacy concerns.
But legislators had spent two years working on bills to limit loans and they easily disposed of Sanford's veto with a 105-4 vote in the House followed more than three hours later in the Senate with a 39-3 vote.
Sanford spokesman Joel Sawyer said the override was disappointing. "If people need money, they are going to find a way to get it and there are more destructive ways of doing that," he said.
But consumer advocates were happy to be making progress on an issue they've pressed for years.
"It's been such a hard battle," said Teresa Arnold, an AARP lobbyist who helped push the regulations. While the legislation is a small step, it "takes us certainly farther than we are."
"They're going to be tough," said Jamie Fulmer, spokesman for Advance America Cash Centers Inc., the Spartanburg-based industry leader. "Some operators are not going to be able to continue operations."
While the House vote came with little debate, Sen. Kevin Bryant, a pharmacist and Anderson Republican, said the database was open for abuse. "There's always somebody out there that's willing to break the rules," Bryant warned.
The bulk of the legislation will go into effect when the database is ready to use. It will limit people to a single $550 loan at any time. Consumers would have to wait a day between loans for the first seven and then two days for additional loans.
Current law lets payday lenders charge $15 for every $100 borrowed on a two-week loan, the annual percentage rate equivalent of 460 percent. That law also caps loans at $300 each, but there's no limit on the number of consumers can take out, so many write two checks at a time and then take out more loans when they can't pay those off.
Sen. Gerald Malloy, D-Hartsville, said if the industry doesn't stop predatory practices, he'd make a mission out of cracking down it. "If you provide a necessary service, good for you," Malloy said. But "the message we are getting from our community is it is not."
Sue Berkowitz, executive director of the low-income advocacy group South Carolina Appleseed Legal Justice Center, said legislators and consumer advocates will be able to measure what the industry does with that database. They'll be watching to see if consumers are locked in a cycle of debt from back-to-back loans.
"The industry claims people don't make loan after loan and take out money that they can't afford to pay back," Berkowitz said. "The Legislature is willing to give them an opportunity to try to behave honorably."
Fulmer said those repeat loans show "a small number of consumers that don't use the product responsibly."
Legislators are skeptical.
"I do think ultimately we are going to be looking at banning the industry in this state," Sen. John Courson, R-Columbia, said.
Sanford also lost a bit of his executive authority. The Legislature overrode his veto of a bill that takes away his power to fire board members at will from the State Ports Authority Board. Legislators talk about restructuring, but "what we saw today is despite their talk about accountability, our state is saddled with a legislative body that is content to further set our state back as has been done with this bill," Sanford in a statement.
Sanford can still remove board members for cause and appoint two new members to the board every year as terms expire, said Senate Transportation Committee Chairman Larry Grooms, R-Bonneau.
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