BORROWING

Payday lenders battling Senate

Bill opponents say conflict of interest plagues legislators

By Jim DuPlessis - McClatchy Newspapers

COLUMBIA --

Before the S.C. Senate passed tougher restrictions on payday lenders, state Sen. John Hawkins reminded legislators that they created the high-interest lending business with a bill they passed.

"We were gigantic suckers when they came to us," said Hawkins, R-Spartanburg.

"They knew what they were doing, and we didn't. And it's time now to pay the bill."

Critics said the legislature created an easy, addictive form of debt. In the first six years after that law's 1999 passage, payday lenders reaped more than $776 million in fees and interest charges from South Carolinians.

Now payday lenders are fighting the Senate bill before an S.C. House subcommittee.

The Senate's proposal would limit the amount of loans borrowers could hold from payday lenders.

The legislation also would require borrowers to wait, or "cool off," for seven days between payday loans. A hearing on the bill is scheduled for 9 a.m. Thursday.

While Hawkins ripped payday lenders, other senators questioned whether Hawkins has a conflict of interest.

Hawkins and other legislative supporters of payday restrictions - all lawyers - filed class-action lawsuits last fall against Spartanburg-based Advance America, the nation's largest payday lender.

So while they are moving legislatively to restrict payday lenders, Hawkins and allies also are suing the industry.

That's unfair, payday lenders say.

"I can't think of any situation where so many current members of the General Assembly have participated in lawsuits against a company regulated by the state," said Jamie Fulmer, Advance America's spokesman.

Hawkins and the other legislators representing former payday borrowers say there is no conflict of interest. They said their role as lawyers is to repair past damages by specific lenders, while their role as legislators is to consider new laws to solve future problems.

Hawkins and state Sen. Vincent Sheheen, the Kershaw Democrat who also is a member of Hawkins' subcommittee, filed a class-action suit against Advance America in September on behalf of former payday borrowers.

The suit, now in U.S. District Court, states that Advance America's loans were unconscionable because the company should have known the borrowers could not repay them. Advance America has denied the allegations and moved to dismiss the suits or have them sent to arbitration.

Pete Strom, a Columbia lawyer and former U.S. attorney, and 11 other state legislators filed a similar class-action suit on behalf of other former borrowers.

The legislators who are part of Strom's lawsuit are: Sens. Luke Rankin, R-Horry; Brad Hutto, D-Orangeburg; and David Thomas, R-Greenville; and Reps. Fletcher Smith, D-Greenville; Creighton Coleman, D-Fairfield; Jim Harrison, R-Richland; Chris Hart, D-Richland; Doug Jennings, D-Marlboro; Todd Rutherford, D-Richland; Murrell Smith, R-Sumter; and James David Weeks, D-Sumter.