Payday Loans
Many consumers who need cash quickly turn to payday loans—short-term, high interest loans that are generally due on the consumer’s next payday after the loan is taken out. The annual percentage rate of these loans is usually very high—sometimes 390% or more. In recent years, the availability of payday loans via the internet has increased significantly. Unfortunately, some payday lending operations have employed deception and other illegal conduct to take advantage of financially distressed consumers seeking these loans.
The Federal Trade Commission (FTC) enforces a variety of laws to protect consumers in this area. The agency has filed many law enforcement actions against payday lenders for, among other things, engaging in deceptive or unfair advertising and billing practices in violation of Section 5 of the FTC Act; failing to comply with the disclosure requirements of the Truth In Lending Act; violating the Credit Practices Rule’s prohibition against wage assignment clauses in contracts; conditioning credit on the preauthorization of electronic fund transfers in violation of the Electronic Fund Transfer Act; and employing unfair, deceptive, and abusive debt collection practices.
The FTC has also filed recent actions against scammers that contact consumers in an attempt to collect fake or phantom payday loan debts that consumers do not owe. Further, the FTC has filed actions against companies that locate themselves on Native American reservations in an attempt to evade state and federal consumer protection laws.
Car Title Loans
A car title loan is also a loan made for a short period of time—often for only 30 days. To get a car title loan, you must give the lender the title to your vehicle. The lender gives you cash and keeps the title to your vehicle. When it is time to repay the loan, you must pay the lender the amount you borrowed, plus a substantial fee—25% of the amount you borrowed, for example.
If you borrow $1,000 for 30 days, and the lender’s fee is 25%, you must repay the lender $1,250 30 days later. And if you are not able to repay the money when it is due, the lender may take or seize your car and sell it to satisfy the loan. This can be devastating for someone who relies on their car to get to work or to the grocery store.
In South Carolina, payday loans are legal and regulated by state law. The South Carolina Deferred Presentment Services Act governs the terms of payday loans, also known as deferred presentment services. Lenders must obtain a license from the State Board of Financial Institutions, and there are limits on the loan amounts and terms. For instance, the maximum amount that can be borrowed is $550, and the maximum term is 31 days. The law also specifies a maximum finance charge that can be imposed on the loan. Additionally, borrowers are limited to one outstanding loan at a time and must wait at least one day after repayment of a loan before taking out another. The federal laws enforced by the Federal Trade Commission (FTC), such as the Truth In Lending Act and the Electronic Fund Transfer Act, also apply to payday lenders in South Carolina, requiring clear disclosure of rates and terms and protecting against unfair practices. Car title loans are also permitted in South Carolina, with the loan amount typically based on the value of the vehicle. Similar to payday loans, car title loans come with high fees and the risk of repossession if the loan is not repaid. It's important for consumers to be aware of the high costs and risks associated with both payday and car title loans and to consider alternative financial options when possible.
