Palmetto State News

Two groups pushing for restrictions on installment lenders in South Carolina are part of a “network of businesses and advocacy groups—which has cumulatively received more than $380 million in federal grants, loans, and other taxpayer assistance since 1996" and "has spent millions lobbying the federal government on measures including additional regulations on those lenders,” reported the Washington Free Beacon. 

The two groups — Self-Help Credit Union and Center for Responsible Lending — are both run by North Carolinian Martin Eakes and are part of the South Carolina Fair Lending Alliance that is lobbying for a bill this year to restrict the marketing efforts of installment lenders in South Carolina.  

In the last legislative session, the groups lobbied for a bill — similar to those passed in other states, such as Illinois and New Mexico, which would have set a 36 percent interest cap on all loans.

That bill failed to pass, and so this session, the groups are backing a bill, S-910, that would place a number of restrictions on lenders operating in South Carolina.

Among other measures, the bill, sponsored by state Sen. Tom Davis (R-Beaufort), would prohibit installment lenders from using text messaging to market to consumers — something Dan Walters, CEO of Greenville-based Credit Central, LLC, said is already prohibited under the federal Telephone Consumer Protection Act. 

Walters also wrote in a Post and Courier op-ed that, “the bill requires installment lending companies like mine, which are not banks or credit unions, to undertake analysis of prospective borrowers’ ability to repay a loan before making the loan. But all licensed installment lenders in the state already do this through an underwriting process that is more rigorous than the bill’s requirements, and usually includes face-to-face meetings between the borrower and installment lender."

Eakes and Illinois Lending Rate Caps

In 2021, Eakes-affiliated groups successfully pushed for the enactment of SB 1792, which capped interest rates on loans at 36%.

The “coalition” of groups lobbying for the bill included two Eakes-affiliated credit unions — Chicago-based Seaway and Second Federal, according to a press release from the Illinois-based Woodstock Institute. 

Seaway, which was “once the Midwest's largest African-American owned bank,” was purchased by Self-Help Credit Union, owned by Eakes, who is white. 

In 2018, the MacArthur Foundation, of which Eakes is a former “fellow,” loaned Seaway $15 million. 

The Woodstock Institute was quoted in a March 16, 2017 Chicago Tribune story about the Seaway acquisition, saying that Self-Help’s “experience will help make Seaway thrive.” 

Self-Help also acquired “the deposits and two branches of Second Federal Savings and Loan” in 2012, reported the Chicago Tribune.

Following those acquisitions, Self-Help’s “assets stand at about $2.3 billion, including a venture unit that makes higher-risk business loans,” reported Business North Carolina.  

The Woodstock Institute, which was part of the coalition lobbying for the Illinois rate cap bill along with Eakes-affiliated Seaway and Second Federal, released a study earlier this month saying that the 2021-passed interest rate cap bill “has saved Illinois consumers more than $600 million.” 

In January 2023, however, research conducted by professors at Mississippi State University and Mississippi College and a member of the Federal Reserve Board of Governors found that “the interest-rate cap decreased the number of loans to subprime borrowers by 38 percent and increased the average loan size to subprime borrowers by 35 percent.”

“Responses to a survey of small-dollar-credit borrowers in Illinois who lost credit access suggest the interest-rate cap worsened the financial well-being of many of these borrowers,” said the research paper abstract, authored by Thomas W. Miller Jr., Mississippi State University; J. Brandon Bolen, Mississippi College; and Gregory Elliehausen, board of governors, Federal Reserve System. 

“Legislators motivated by genuine public interest rationales might not recognize the harmful consequences of their actions for these higher-risk borrowers with few credit alternatives,” wrote the authors. “Legislators might also be motivated by the benefits of the interest-rate cap for lower-risk borrowers. The interest-rate cap increased the number of loans to prime borrowers by 16% and the average loan size to prime borrowers by 7%,” said the abstract.

Eakes and Operation Choke Point

Eakes was named as an inaugural member of the Federal Deposit Insurance Commission’s (FDIC) “Advisory Committee on Economic Inclusion” upon formation of the committee in 2006. 

Michael Calhoun, the president of the Center for Responsible Lending and former employee of Self-Help Credit Union, is currently on the advisory committee. 

This advisory committee “played a major role in combating the payday lending industry,” reported the Washington Free Beacon. “The FDIC’s efforts are part of a larger initiative involving the Department of Justice and the Consumer Financial Protection Bureau called Operation Choke Point. The effort seeks to eliminate the ability of businesses that federal regulators deem distasteful, exploitative, or dangerous to obtain financing from major American banks.” 

The program’s critics, reported the Free Beacon, say “it is designed to shut down legitimate businesses that the Obama administration opposes on ideological grounds by pressuring banks to stop lending to the classes of businesses it singles out as allegedly destructive or illegitimate.”

Those businesses include legal enterprises, such as payday lenders, gun stores, and tobacco companies. 

“Operation Choke Point is one of the most dangerous programs I have experienced in my 45 years of service as a bank regulator, bank attorney and consultant, and bank board member,” wrote former FDIC Chairman William Isaac in The Hill. 

“When the FDIC floated the pilot program, Eakes said it could be used as a means to eliminate the competition,” reported the Free Beacon. "Eakes ‘suggested that the most valuable outcome of the pilot project might be to convince policymakers that there is an alternative to payday loans, thereby making it more palatable to prohibit payday loans,’ according to minutes of the meeting.” 

South Carolina Hearings on S-910

Eakes’ Self-Help Credit Union has been front and center of the push to regulate installment lenders in South Carolina this year, with Kerri Smith, Self-Help’s regional president for South Carolina, featured in news stories announcing the filing of S-910 on Jan. 9. 

Smith also is running as a Republican in the primary election for the South Carolina 28th House District against incumbent state Rep. Ashley Trantham (R-Greenville). Smith has touted "the support of her employer, Self-Help Credit Union," in her campaign against Trantham, who is a member of the South Carolina Freedom Caucus.

The South Carolina Senate Labor, Commerce, and Industry Committee held an initial hearing “dedicated to proponents” of the bill, including the South Carolina Fair Lending Alliance, on Jan. 10. 

In that hearing, South Carolina Fair Lending Alliance head organizer Susan Stall spoke against “live checks,” which are pre-approved checks sent in the mail and would be banned under the bill. 

At a follow-up hearing on Jan. 17, state Sen. Wes Climer (R-Rock Hill) said he has “a very real problem discriminating against which type of business can and can’t advertise to their desired customer base,” reported South Carolina Public Radio. 

Another hearing on the legislation is scheduled for Feb. 7 at 9 a.m.