If public officials aren’t tackling the matter of bad credit loan lending then the general public will. At least that’s the idea behind a couple of new petitions circulating across South Dakota that would change the way payday loan establishments conduct their business.
In South Dakota, bad credit loan lenders charge interest rates on average 574 percent. Also, The Mount Rushmore State is one of the states in the nation to not cap payday loan interest rates. This allows retail payday loan stores like Dollar Loan Center and online websites to make a killing of their borrowers. Indeed, there have been attempts to reform the industry with capping interest rates but they have failed.
One petition is seeking to cap interest rates at 36 percent and is being sponsored by South Dakotans for Responsible Lending.
Steve Hildebrand is co-chair of the bipartisan organization and he says that there is “great disdain” within the general public regarding high interest rates that payday loan lenders charge the poor, especially those who are desperate.
“We feel good about where we’re at. We feel confident we’re going to meet our goals. We’ve got a lot of work ahead of us but we will get there,” Hildebrand said in an interview with SDPB Radio on Wednesday.
Steve Hickey, a conservative member of the state legislature, who has been working with Hildebrand in these efforts, told the Washington Post late last year that high interest rates place families in debt spirals. These rules have been designed to keep the poor and elderly in a never ending cycle of rolling over loans or taking out additional ones.
The second petition is a little bit more confusing, says reform proponents. Hildebrand purports that the other petition is actually a decoy that was started by the bad credit loan industry as part of an initiative to deceive voters.
This petition calls for the state to cap interest rates at 18 percent, but there are some caveats. The 18 percent cap would be relegated only to verbal loan agreements as opposed to written loan agreements. The petition is being sponsored by South Dakotans for Fair Lending.
The organization’s chair, Lisa Furlong, has not publicly spoken about the petition with any media outlet, except for the Internet blog Dakota War College. Furlong told the blog that the petition is genuine and thoughtful and claimed that it is not “phony.”
“Our measure is thoughtful, reasoned, and just as real, if not more so, than any others out there. I’m not an Obama operative or a politician like the ringleaders of the other effort,” Furlong told the blog earlier this month. “I’m just a working mom. We have as much right under our state constitution to put our ballot measure before the people of South Dakota as anyone else. For anyone to say otherwise is somewhat arrogant and just plain wrong.”
Although she concedes that her plan would be difficult to implement because there needs to be a constitutional amendment, Furlong does think it strikes the right balance as it protects consumers and keeps bad credit loan providers in business.
The payday loan industry in South Dakota is worth approximately $47 million and contributes 0.139 percent to the state economy.