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    Entries in consumer lending (1)

    Wednesday
    Nov092016

    Facing 652% Interest Rates, South Dakota Voters Regulate Payday Lending

    They joined the growing number of states that regulate the industry that critics say traps poor people in a cycle of debt.
    BY  NOVEMBER 9, 2016

    In South Dakota, where payday loan interest rates average a whopping 652 percent and are among the highest in the nation, voters have struck back by approving a 36 percent rate cap.

    With more than half of precincts reporting Tuesday night, results showed voters approved the move to regulate the industry by a margin of three to one. More than a dozen other states have enacted a similar cap on loan interest rates.

    Critics of the payday industry say lenders prey upon low-income borrowers who are unable to access financing from mainstream banks. These borrowers, they claim, easily get trapped in a cycle of debt. Payday lenders, however, argue that they fill a critical hole in the economy by allowing people with poor credit to get emergency loans.

    The push for the rate cap was led by South Dakotans for Responsible Lending, which also fended off a rival measure placed on the ballot more recently and backed by the payday lending industry. That measure proposed an 18 percent cap -- unless the borrower agreed to a higher rate. Opponents said the measure was intentionally misleading and would have essentially legalized sky-high interest rates for payday borrowers in South Dakota.

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