According to South Carolina law, a payday lender can advance money - up to $300 - to borrowers for a fee of no more than $15 per $100 borrowed for a period not to exceed 31 days. The borrower provides the lender a check dated on the date the check was written and the lender holds the check for a period of time as agreed to in a written contract before presenting it to the borrower's bank. The lender cannot renew or “flip” the loan with the borrower.
In the last five years, the number of payday lenders in the state has doubled to 700 statewide, and their revenues increased by more than $30 million from 2001 to 2003. To learn how payday loans are affecting borrowers in South Carolina, AARP conducted this e-mail survey of credit counselors' experiences with clients having payday loans.
All of the 13 respondents have had experience with payday loan consumers. A quarter of the just over 8,000 clients served by these counselors in the past year told them that payday loans were a part of their credit problems; such clients usually had multiple payday loans simultaneously. Only one of the counselors reported that, in the past 12 months, there were no clients citing payday loans as part of their credit problems.
The survey was sent by e-mail on January 18, 2005 to three organizations that agreed to participate. The participating organizations were: Family Services, Inc., Consumer Credit Counseling Division; Department of the Army, Army Community Services; and Compass Carolina. These organizations are accredited by the National Foundation for Credit Counseling. The report was prepared by Rachelle Cummins of AARP Knowledge Management who may be contacted at 202-434-6297 for further information. (8 pages)