I know, I know, here we go again with payday loans again. But I was reading something very interesting about it in South Carolina. They don’t actually want to ban payday loans, which is a good thing. But they have been feeling a lot of pressure to do something about them, as they are viewed as a problem by some. So what they did was briliiant.

Rather than regulate lenders per se, their regulations target borrowers. A bill just passed in South Carolina that would prohibit borrowers from receiving more than one payday loan at once. Why is this a good thing you ask? Simple, too many people were taking too many loans and getting into too much debt, just to blame it on high APR and not their own stupidity.

Let me explain: Most payday lenders will allow you to borrow up to 35% of your income. Most will never give you more than this, as they know your tendency to default will greatly increase after that point. But nothing stops you from going next door to another payday lender and getting 35% of your income there. And then doing it again, and again, and again. The problem? Eventually you’re saddled up with plenty of cash…and plenty of debt that you can’t pay back, as you borrowed well over what you make from a single paycheck.

Now, a state wide database will alert lenders if a potential borrower already has a payday loan out elsewhere. This is great, regulate the borrowers, not the lenders. They’re the real problem anyway. Now no one can go spiraling into debt because they borrowed 200% of their income at 400% APR. Hopefully this paves the way for similar legislation in all the states.