After the South Dakota House Commerce and Energy Committee voted down a measure to further restrict short-term lending such as payday loans on Feb. 19, bill sponsor Rep. Steve Hickey (R-Sioux Falls) said he would put the issue before voters. Some panel members advised the bill's supporters to continue negotiating with industry representatives. Hickey countered that industry representatives helped write the proposal only to back-pedal on it at Wednesday's hearing.
"I keep my word. I'm going to the ballot," Hickey declared after the hearing. "This is all a game. Those people expressly told me to put this stuff in the bill and now they are opposing it." He said that payday loans are designed to be renewed multiple times to trap borrowers in debt and that they exploit low-income and elderly consumers.
The rejected legislation would not have limited interest rates for short-term loans but would have imposed additional state regulations and limited the size of loans based on a borrower's ability to repay. Under current law, short-term loans, or the total balances of all loans made by a lender to a customer, are limited to $500. Hickey's bill would have raised the threshold to $700, but the loan or the monthly payments could not have exceeded 25 percent of a borrower's gross monthly income. The bill also would have limited loan renewals or rollovers, allowed extended payment plans without penalty, and required lenders to provide loan data to the state Banking Division.