A payday lender trade group launches a $10 million PR campaign to rehabilitate their image. In their TV commercials, they say “Please borrow only what you feel comfortable paying back when it’s due.”

Consumer advocates, however, note that they still charge up to 400% interest and aren't impressed with this newfound sense of responsibility...

“Payday lenders make it easy for consumers to get trapped in predatory debt,” said Teresa Arnold, legislative director for AARP in South Carolina.

State legislators in South Carolina are considering a bill to cap interest and fees for payday loans at 36%. The sponsor of the legislation explains why it's a growing problem in the state:

State Rep. Alan Clemmons, a Republican who introduced the South Carolina legislation, said it’s needed because neighboring states have either banned or sharply restricted payday loans. In response, lenders have increased business in South Carolina, and the state has become “payday lender Mecca,” Clemmons said.

According to the article, the AARP says the number of payday lenders in South Carolina has doubled over the past five years.

There's another bill that would ban payday lending altogether. According to this article, there are 1,220 payday lenders South Carolina. The state AARP chapter has organized town hall meetings this week to discuss the need for reform.

Elsewhere, Alabama State Sen. Bradly Byrne says he made a mistake in supporting a 2003 law that exempted payday lenders from the state's usury laws. He says he will introduce legislation next month limiting interest and fees to 36%.

In Tennessee, SB1583/HB2149 "Reduces maximum fees that title pledge lenders may charge from 20 percent to 15 percent of the original loan amount; requires principal reduction payments to begin at the first rather than third renewal of the loan; clarifies that routine principal reduction payment deferral is prohibited." SB1584/HB2132 "Limits amount of fees charged by title pledge lender; increases monthly payment amount required by such lenders; gives persons aggrieved by title pledge lenders certain rights including a private right of action; and makes other modifications to the title pledge lenders law." SB1070/HB1431 "Specifically prohibits title pledge lenders from advertising using words that are false or misleading."

In related news, federal banking regulators are cracking down on subprime mortgage lenders:

The devastating reign of "exploding" adjustable-rate mortgages (ARMs) in the subprime market may soon be over. Today federal banking and credit union regulators proposed to clamp down on these risky loans by requiring depository institutions to do more careful assessments before approving these loans for credit-strapped consumers. Exploding ARMs, which begin with a fixed "teaser" interest rate for two or three years and then switch to an escalating adjustable rate, are the most common type of loan in the subprime market, and they have been linked to an alarming increase in foreclosures on subprime home loans.

A sampling of reaction to the news:

Maude Hurd - ACORN National President: "The steering of subprime borrowers into ARMs is one of the biggest predatory practices today, with three out of every four subprime borrowers being given these ARMs that quickly become unaffordable after just two or three years. In the best case, these loans merely result in the loss of equity when homeowners refinance and have to pay new closing costs and prepayment penalties. In the worst case, which unfortunately is all too common, these loans costs families their homes. We applaud the regulators and Chairmen Dodd and Frank for their work to protect homeowners from these abusive lending practices."

[..]

Martin Eakes - CEO, Center for Responsible Lending: "This is an important step toward a return to sensible lending. Subprime loans comprise only 13 percent of outstanding mortgages, but they contribute over 60 percent of foreclosures--and the vast majority of subprime loans today are exploding ARMs. I want to thank FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke, OTS Director John Reich, Comptroller John Dugan, and NCUA Chairman JoAnn Johnson for sending a clear signal that they will not tolerate irresponsible lending practices that put families' homes and wealth at undue risk. I'd also like to thank Chairmen Chris Dodd and Barney Frank for their continuing efforts to ensure that all homeowners receive loans that are sustainable, rather than set up to fail."

The news from other fronts is not so good.

Georgia banned payday lending three years ago, but the legislature is considering a new bill promoted by payday lenders that would again allow the practice in that state.

The Virginia legislature rejected proposals to outlaw or at least reform payday lending in that state, which has only been allowed since 2002.

Similar legislation in Arkansas to make payday lending subject to usury laws failed to make its way out of the Commerce Committee, with only one member voting for it.

This post first appeared at Facing South