South Dakota Payday Loan Firm Fighting Shut Down
Inside Subprime: Oct 12, 2018
By Grace Austin
The payday loan company’s license was invalidated in September 2017 after state financial authorities found them charging illegally high interest fees, essentially putting the chain out of business.
That’s after a ballot measure was passed into law in 2016 that limited interest rates on payday loans to just 36 percent. Before Initiated Measure 21 went into law, a Pew Charitable Trusts report found that the average APR charged for a payday loan in South Dakota was almost 600 percent. The measure also capped the loan amount to $500 and limited the number of times a loan can be renewed to four. A majority of voters supported it.
Now attorneys for the payday loan firm argued before the state Supreme Court that shouldn’t have happened, because the South Dakota Division of Banking didn’t provide “notice of hearing.” The payday lending company’s attorney said that keeping them from a hearing was unconstitutional and that the Division of Banking overstepped its authority.
The state made the case thatthe payday loan firm didn’t exhaust its “administrative” efforts to repeal the decision to revoke the company’s license.
After voters endorsed Initiated Measure 21 in 2016, the payday loan firm’s founder closed its locations, but reopened several stores in 2017. The founder said the stores would follow the new regulations.
The state said the payday loan firm started offering loans that capped interest at 36 percent, but it also began charging additional late fees, in a loophole to get around the new law.
The state argued that those added late fees made interest rates climb to almost 500 percent.
That’s when the Division of Banking began investigating the payday loan firm, in which it was concluded they were still charging above the legal 36 percent threshold.
A ruling from South Dakota’s high court is expected within the next few months.
For information on predatory payday loans in your area, check out all of our Subprime Reports, including: