South Dakota Voters Approve of Cap on Payday Loan Interest Rates

As the entire media landscape is covering Donald Trump’s improbable victory on Election Day and the Republicans control of both the House and Senate, other results from Tuesday’s general election are beginning to finally make their way through the news cycle.

In South Dakota, voters approved a measure to cap interest rates on payday loans.

The results show that 75 percent of voters supported Measure 21, which allows the state government to cap interest rates on short-term, high-interest online loans and car title loans at 36 percent.

Meanwhile, Amendment U, which is a competing measure that would amend the state constitution and permit payday lenders to charge any interest rate they want to borrowers, lost with 60 percent voting against it.

South Dakota, which is a Republican state, seemed to overwhelmingly favor caps on rates.

On the same ballot, South Dakotans voted in favor of adding crime victims’ rights provisions into the state constitution. But state voters didn’t give the thumbs up to dropping party labels from the ballot. They also rejected two other important initiatives: lowering the minimum wage for teenagers to $7.50 per hour and unions being allowed to charge non-union workers fees.

When it comes to the GOP politicians, Trump, Senator John Thune and Congresswoman Kristi Noem were victorious on Election Day.

Since the economic collapse, jurisdictions across the United States have attempted to implement legislation that would place a limit on interest rates charged for payday loans. Other public officials have attempted to take the issue to the ballot box.

A 2014 Pew Charitable Trusts study discovered that the average annual percentage rate charged for a payday loan in The Mount Rushmore State was a whopping 574 percent. Although it hasn’t been confirmed, a quick Google search will show that there are dozens of payday loan businesses that claim to have the best rates and cheap interest scattered across South Dakota.

Soon after the Pew report was released, critics immediately responded. One of these included Republican State Representative Steve Hickey, who argued for imposing more regulation on the payday loan industry. He has gone far as suggesting that it’s time to prohibit payday lending completely in the state.

“They can tell us all that this is just about helping people, but it’s an intentionally crafted defective financial product that is marketed to the financially unsophisticated,” said Hickey, a Sioux Falls Republican. “They’re bilking billions of dollars out of poor neighborhoods, and the taxpayers get to clean up the mess. I want to get them out of the middle, and let society help these people in other ways.”

Despite his opposition to homosexuality and same-sex marriage, Hickey has received support from fellow Democrats when it comes to the issue of payday loans.

With the Consumer Financial Protection Bureau (CFPB) on the cusp of passing a federal regulatory framework for the national payday loan industry, states’ initiatives will be able to complement the new rules and regulations. That is if U.S. President Barack Obama signs the proposal before he leaves the White House.