Palmetto State News

As the South Carolina State Senate considers legislation to limit small dollar loans, Tom Miller, finance professor at Mississippi State University, said a bill to limit small dollar loans in Illinois led to reduced lending to subprime borrowers.

That Illinois law, a 36% all-in rate cap on Illinois lenders, has been used as a model by groups lobbying for S.910, the proposed bill in South Carolina.

“As we found in our paper on the effects of imposing the 36% all-in rate cap in Illinois, there were fewer loans and fewer dollars lent to borrowers with credit scores below 600, i.e., subprime borrowers,” Miller recently said in an interview with Chicago City Wire. “Information to make decisions is critical for any consumer to help them make choices, in any market. Any attempt to inhibit information flow, by definition, makes consumers less well off.”

Miller, who is a senior fellow at Consumers' Research and a member of the Consumer Financial Protection Bureau's Academy Research Council, was referring to a paper he co-authored titled “Credit for me but not for thee: The effects of the Illinois rate cap.” 

"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," wrote Miller and his co-authors in the summary of that paper. 

Miller said he disagrees with those who propose limiting credit access based on their perception of the individuals’ financial decision-making capabilities. Instead, he advocates for empowering people to independently manage their finances by providing them with comprehensive information. 

“First, attempts to limit access to credit have a centuries-long history. It seems to me that the focus of these attempts is on consumer credit, i.e., credit not secured by real estate. Yet, mortgages represent a much bigger market, as do student loans and loans to finance vehicles,” Miller added. “Second, it seems that the focus of some who want to restrict credit to those that are not ‘able’ to make financial decisions about their own lives is, at times, condescending and mean-spirited. I believe that people are in the best place to make decisions about their own finances and should be free to make those decisions—under full information, of course.”

S.910 would restrict the marketing activities of some smaller dollar lenders in South Carolina.

Stephen Gilchrist, the CEO of the SC African American Chamber of Commerce, told Palmetto State News that he's concerned the bill could limit access to credit for all South Carolinians. 

Also said a “glaring oversight” of the bill is that it would not regulate credit unions, while regulating other lenders in the state.

Miller raised similar concerns.

“I am amazed at how banks and credit unions continue to get themselves exempted from legislation about consumer lending,” Miller said. “Aren’t lenders lenders? If the banks and credit unions do not engage in any activities that this bill aims to curb, then there is no need to exclude them by law—they exclude themselves by their activity in the market. If they do engage in these activities, why is it okay for banks and credit unions to engage in these activities but not other lenders?”

The lobbying to pass S.910 is being led by Self-Help Credit Union and its affiliate, the Center for Responsible Lending (CRL). CRL has received more than $25 million during the past ten years from a foundation started by a N.C. couple who Time Magazine ranked among “25 people to blame from the (2008) financial crisis,” reported Charleston Reporter. 

The group has also received more than $2 million from left wing political activist George Soros.

Kerri Smith, the South Carolina president of Self-Help Credit Union, is actively lobbying for the bill while also running as a candidate in the Republican Primary for the 28th State House District. 

Both Miller's and Gilchrist's concern about S.910 were shared by Carrie Sheffield, a senior policy analyst at the Independent Women’s Forum, who told Chicago City Wire the bill "is deeply flawed and will harm vulnerable South Carolinians."

She argued that the bill might limit credit access for underserved populations, particularly Black and Hispanic communities, and urged policymakers to address broader economic issues affecting low-income individuals instead.