Legislators Propose Greater Payday Loan Regulations In South Dakota State Legislature
Bills regulating the roughly 300 payday loan stores in South Dakota were introduced in the South Dakota State Legislature as its 2006 session convened.
The state's lack of an interest rate limit, which was aimed at luring banking companies, has fueled the rise of these quick loan companies, according to the Aberdeen News. Loans from the various cash advance establishments in the state typically last up to 30 days and carry annual interest rates of 400 percent or more.
One proposed bill would amend the current South Dakota short-term lending law to add the definition of a consumer small loan — a short-term, non-revolving loan of less than $500 that is to be paid in a single installment.
Mary Glenski, a Sioux Falls Democrat who sponsors the bill, said it would regulate the increasingly popular short-term loans without alienating the credit card industry. The bill would eliminate a section that allows borrowers to roll over — or extend – a faxless payday loan up to four times.
While the lawmakers' approaches differ, anti-payday legislation is drawing bipartisan support. Joni Cutler, a Republican from Sioux Falls, is proposing her own bill that defines short-term consumer loans as anything that applies to an individual and lasts six months or less. Cutler's bill would require lenders to disclose any fees or charges, including the cost of a loan as an annual percentage rate (APR).
"I'm sure whatever does happen or gets passed will be reasonable. I can't comment on any of the specifics because I haven't had a chance to go through them," said Bruce Cooey, who manages Dollar Loan Center stores in South Dakota, Utah and Nevada.
South Dakota payday advance companies say that the loans are meant to be repaid quickly, almost like an overdraft account. But lawmakers said they fear the ability to extend the loan four times is what leads to an endless downward spiral of debt — a weekly $10 fee on a $100 loan, by the end of one year, adds up to more than $520 in late surcharges alone.
"It's not a partisan issue," said Bill Napoli, a Republican from Rapid City that is co-sponsoring both bills. "It's a people issue."