On November 8, 75% of South Dakota voters approved reducing the cost of payday loans from 574% to 36% annually.  At the same time, a significant majority of South Dakotans rejected the payday lenders' proposal to allow permanent unlimited rates.

The rate cap ballot measure approved by South Dakota voters will cap the annual interest rates at 36% for payday, car title, and installment loans.  The voters' decision aligns South Dakota with protections already in place for active-duty military nationwide, and makes South Dakota the 15th state to prevent the harms of high-cost debt trap loans. 

Center for Responsible Lending (CRL) Policy Counsel Whitney Barkley-Denney made the following statement:

Though they spent over $3 million, compared to less than $100,000 by a bipartisan coalition of faith-based, consumer and family advocates, and ran a truly deceptive campaign, the out-of-state payday lending industry failed to fool South Dakotans into supporting their false reform. Instead, voters chose real reform in the form of a 36% interest rate cap.

We congratulate the people of South Dakota for taking this powerful step to stop payday and other predatory lenders from harming families in their state who are struggling to make it from one paycheck -- or perhaps one social security check -- to another.

Enforcing an interest rate cap at or around 36% is the most effective way to disrupt the predatory payday lending business model, which relies on a combination of very short terms and very high fees, plus access to the borrower’s bank account or vehicle title, to entrap families in long-term debt. Payday loan customers are more likely to incur overdraft fees, lose bank accounts, and file for bankruptcy.

CRL Director of State Policy Diane Standaert added the following statement:

By passing this measure, South Dakota joins fourteen other states plus the District of Columbia that control payday lending through an interest rate cap. South Dakota is also the fourth state to pass a cap through a ballot measure, following Arizona and Ohio in 2008 and Montana in 2010.

The overwhelming passage of the interest rate cap in each of these states demonstrates the popularity of this particular reform measure when it is put to the vote of the people. The Consumer Financial Protection Bureau is not authorized to regulate payday lending through an interest rate cap, but states can and should. The approval of South Dakota’s ballot measure should show state lawmakers that similar legislative measures will have the strong bipartisan support of their constituents.

View our map showing the interest rates on a typical payday loan for each state, updated to include South Dakota as one of the fifteen states plus the District of Columbia where rate caps stop the payday debt trap (to take effect November 16, 2016).

Read our report, Shark-Free Waters: States Are Better Off Without Payday Lending, published August 2016.  

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at ricardo.quinto@responsiblelending.org.

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