Payday Lender Sues South Dakota, Claiming 36% Interest Rate is too Low

Sunday, June 14, 2015
Erin Ageton, vice president of Select Management Resources

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.

-Steve Straehley


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)


GBers 8 years ago
Here's the company she's a "VP" for - poor little cash-strapped critters! A college drop out, failed insurance salesman, and former used car salesman, Rod Aycox is many things but he is not a payday lender. He runs Select Management Resources, the parent company of LoanMax and other title loan companies where cash strapped customers offer the titles of their automobiles as collateral for short-term loans. As you might expect, the title loan industry – like the payday lending industry – traps customers in a cycle of debt. ... even after a reporter went to one of his LoanMax storefronts and was offered a title loan with a 420 percent APR, Aycox said his company never charges such a high rate and that an even greater 500 percent was simply the ceiling when it comes to APR’s. ... Aycox and his company settled a wrongful death suit after a repo man hired by the company shot and killed a borrower while trying to seize his vehicle. He and his companies have also faced a federal class action lawsuit accusing them of “victimizing customers by collecting illegal debts at interest rates that violate both Georgia’s criminal usury statute and federal truth-in-lending laws.” The DC Attorney General also sued Aycox’s LoanMax for charging interest rates of more than 300 percent. LoanMax ultimately settled out of court by refunding customers and returning repossessed cars.
Maudlin 8 years ago
Where are the lenders providing these small loans at this 36%APR ideal? There are none. So in essence, all a rate cap does is take this credit option away from the people that need it most. You can't just make up a rate, throw it out there, and expect everything to work out. Find out what is a sustainable business model for making small loans, and then make the rules to that model.
anonamouse 8 years ago
I don't see how these sharks can enforce collection on their extortionate loans. Anyone who would borrow at 36% is clearly not obligated to repay it, as I understand the law, since a contract made under duress is not binding.

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