South Dakota payday lender shut down by banking authority (again)
Inside Subprime: September 14, 2017
By Caroline Thompson
For the second time in less than a year, Dollar Loan Center – a payday lender with storefronts in Sioux Falls and Rapid City, South Dakota – had its lending license revoked by the South Dakota Division of Banking on Wednesday, after a review of company practices revealed the short-term lender was violating state law.
While Dollar Loan Center was charging borrowers interest rates at or below the national 36 percent cap, the lender’s one-week loans included massive late fees if borrowers did not pay back their loans in full within seven days, essentially charging more interest without having to call it interest.
Last year, Dollar Loan Center was forced to shut down after South Dakota voters approved a ballot measure that banned short-term, high interest payday loans. When the lender reopened in July 2017, owner Chuck Brennan said the company’s new lending measures were designed to follow the new regulations.
“Our new loan product conforms specifically to the new laws that were voted into place by Measure 21,” said Brennan in a statement to local press shortly after Dollar Loan Center’s grand reopening this summer.
But state regulators didn’t buy it, and almost as soon as the company began business as usual, the South Dakota Division of Banking began investigating the legality of the lender’s “new” practices.
According to an article in the Argus Leader, regulators believed Dollar Loan Center’s late fees were nothing more than a legal loophole to “continue profiting on desperate South Dakotans.” While the official interest rates for these short-term loans might follow the law, the fees for people who can’t pay back these loans in a week are similar to the amount Dollar Loan Center charged in interest before the ballot measure banning high-interest loans was approved.
Brennan is threatening to take legal action against the Division of Banking, but said he would be making no further statement on the matter for the time being.
“We have consistently asserted that Dollar Loan Center’s actions were at odds with IM 21 that passed with over 75 percent of the vote last November,” said Sen. Reynold Nesiba, who sponsored the payday lending ban measure. “South Dakotans need to remain vigilant in protecting consumers from predatory lenders.”
To learn more about the dangers of payday lending, check out these related pages and articles:
- Payday Loans: The Most Dangerous Debt Trap
- Know Money, Win Money! Episode Two: Payday Loans
- What’s the Difference Between a Payday Loan and an Installment Loan?
- What is the Payday Loan Debt Cycle?