36% interest rate cap becomes law of land in hard-fought payday lending ballot measure battle
SIOUX FALLS, SD – Today, South Dakotans voted overwhelmingly to pass Initiated Measure 21, which caps annual interest rates at 36% for payday, car title and installment loans. Voters also resoundingly rejected Amendment U. Amendment U—a prohibition against rate caps—was designed to appear to cap interest rates at 18%, but would not have applied to written agreements, so was no cap at all. It was supported by the payday lending industry.
South Dakotans for Responsible Lending, a bipartisan coalition that has been working together to reform payday lending in the state for two years made the following statement:
We are thrilled that the people of South Dakota stood up and said ‘enough’ to the predatory lenders who have been trapping hardworking families in debt at 574% interest rates.
South Dakota will become the fifteenth state plus the District of Columbia to rein in predatory lending by passing an annual interest rate cap on payday, car title and installment loans at or around 36%, and the fourth state out of four to pass a cap when the issue was put to a vote of the people as a ballot measure.
Arizona citizens voted to allow payday authorization to sunset in 2008, which brought a 36% cap into force, and Ohio passed a 28% cap by ballot in 2008. Montana passed a 36% cap by ballot in 2010. The passage of South Dakota’s ballot measure further demonstrates the popularity of the 36% cap when the public is educated about triple-digit interest rates and the debt trap of payday lending.
Research has shown that working families are better off in states that have gotten payday lending under control—fewer unpaid bills, fewer bankruptcies, fewer closed bank accounts. We are proud to join those states, and we feel that the working families of South Dakota will now have the protection they deserve from predatory lenders who would cause them financial harm.
We are also pleased that South Dakotans saw through the highly-financed smokescreen that the industry put up. The out-of-state payday lending industry spent millions of dollars on their deceptive campaign to get a constitutional amendment on the ballot that would confuse voters, and in the final days ran deceptive advertising attempting to link the 36% rate cap to President Obama and Hillary Clinton.
But in the end, tireless grassroots campaigning, the support of the faith community and a coalition of liberal and conservative groups including Democrats, Republicans, AARP and the Family Heritage Alliance, and the near unanimous support of opinion leaders in the media overcame the payday lenders monetary advantage.