Payday Lender Sues South Dakota, Claiming 36% Interest Rate is too Low
The payday loan business, long known for taking advantage of its customers by putting them in a never-ending debt cycle, claims a proposed South Dakota ballot initiative might put them out of business in that state.
South Dakotans for Responsible Lending is gathering signatures to put a question on the November 2016 South Dakota ballot that would limit the interest charged by payday loan outfits to 36% per year. Payday lenders are crying foul, saying rates that low would force them out of business. The average interest rate on a South Dakota payday loan now hovers around 574%.
Now one of them has filed suit, claiming the state’s attorney general has not spelled out sufficiently what the result would be if the proposal becomes law. “The measure’s purpose, effect and legal consequence is to set a ‘maximum’ interest rate so low that this form of consumer credit will simply disappear,” Erin Ageton, vice president of Select Management Resources, says in her request for Writ of Certiorari, according to Courthouse News Service.
“The law does not actually result in a cap on loan rates; instead, it eliminates loans altogether. No lender and no borrower will ever enter into a 36 percent short-term loan in the real world, just as no bank and borrower would ever enter into a home loan for a miniscule amount of interest that fails to cover the cost of making the loan, and no insurer would ever underwrite a policy for a small fraction of the actuary’s expected payout on claims.”
Ageton wants a line added to the ballot statement reading “The initiated measure, if adopted, will eliminate short-term loans in South Dakota.”
Proponents of the measure say payday loan companies make plenty of money because their loans are rarely paid off within the specified timeframe. Instead, they’re usually refinanced every few weeks, costing consumers more and more.
To Learn More:
Payday Lender Calls 36% Rate Cap Impossible (by Lacey Louwagie, Courthouse News Service)
Payday Lenders Sue Attorney General to Delay Rate-Cap Initiative (by Cory Allen Heidelberger, Dakota Free Press)
Lawsuit Takes Aim At Effort To Cap Payday Loan Interest Rates (by Brady Mallory, Keloland)
A New Way to Take Advantage of Desperate Borrowers Is Trending in California (by Ken Broder, AllGov California)
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