South Dakota Payday Loan Reform Highlighted in Documentary
Inside Subprime: Nov 17, 2018
By Lindsay Frankel
The Center for Responsible Lending recently released a documentary that details advocates’ fight to cap interest rates on risky payday loans and car title loans, and installment loans in South Dakota. Produced in cooperation with South Dakotans for Responsible Lending, the film shows how relentless activism against the payday loan industry can lead to reforms that save borrowers from financial harm. Voters overwhelmingly passed Initiated Measure 21 in South Dakota, with 76 percent voting to cap interest rates at 36 percent.
Before November of 2016, when South Dakota became the fourth state to pass such a measure, payday loan and title loan firms in South Dakota were charging annual interest rates of up to 574 percent. It cost borrowers an average of $660 just to borrow $300 for five months, according to 2016 data from Pew Charitable Trusts. Low-income borrowers struggled to pay back their loans on time and often ended up trapped in insurmountable debt.
During the battle between consumer advocates and predatory lenders, payday loan industry groups spent nearly $3 million opposing caps on interest rates, which included getting another measure, Amendment U, on the ballot. The confusing question was an attempt to get voters to provide a loophole for payday lenders; it appeared to establish an 18 percent rate cap, but ultimately would allow lenders to get around the rule.
The battle against the payday loan industry was launched by a broad coalition of faith-based organizations, social service organizations, and politicians. Though the groups had little money to fight against the industry, they were able to educate voters about the ballot measures, which led to a win for consumers.
The documentary, Let My People Go: South Dakotans Stop Predatory Lending, also tells the stories of South Dakotans personally impacted by the debt trap caused by payday and title loans. Interviewees discuss their struggles paying off their loans, their experiences with the predatory business practices of lenders, and the relief they felt when finally getting out of debt. The documentary also reveals that as predatory lenders closed down shop in South Dakota, churches, credit unions, and other productive businesses moved in to take their place.