South Carolina is creating more regulations on payday loans. A bill just passed in their House that would limit the number of loans anyone could get to just one at a time.

This is a decently thought out bill because it aims at prohibiting self-destructive behavior. Payday loans in and of themselves are not bad things. The APR is very high, but the term is very low, so no one actually has to pay that much in fees.

The problem comes when someone tries to borrow too much. Most lenders will cap the amount you are approved for at 35% of your income so that no one borrows more than they can pay back.

However, what if a borrower comes in and requests a loan for 10% of their income. They come back one week later saying they need 25% of their income, thus getting to the 35% cap. Well, they will be out of luck in South Carolina. Until they have paid back the first loan and passed the cooling off period, they cannot get another loan.

So legislation like this bill in South Carolina has good intentions, but all payday lenders already have safeguards against borrowers asking for too much money. It is more of a regulation on payday borrowers than payday lenders. All it does is restrict freedom when it comes to payday loans.