South Dakotans Vote To Cap Payday, Auto-Title Loan Interest Rates At 36% Image courtesy of eyetwist
More than a dozen states and the District of Columbia currently prohibit payday lenders and other short-term loan companies from charging exorbitant interest rates on their financial products. Last night, the residents of South Dakota added their state to that list, voting to cap interest rates on short-term loans at 36%.
South Dakotans approved Initiated Measure 21 Tuesday essentially banning loans, which typically come with triple-digit interstates, known to create a revolving debt trap for borrowers.
Initiated Measure 21 proposed a prohibition on state-licensed payday, title, and other short-term loan lenders from imposing interest rates greater than 36%.
In all, according to Ballotpedia, 75.57% of voters approved Initiated Measure 21, while 24.43% opposed the loan cap.
With the vote, South Dakota joins 18 other states and the District of Columbia in capping the amount of interest lenders can charge on payday and auto-title loans. Each of the states caps the loans at a different rate ranging from 24% to 48%, according to the Consumer Federation of America.
A similar measure sponsored by the payday lending industry — and containing a loophole — failed to garner support from voters.
Amendment U aimed to restrict the interest rates on all lending products to 18% unless a lender specifically wrote a different interest rate into its contracts. That meant that if an agreement between the lender and borrower existed, the company could charge any type of interest rate.
This second, industry-backed measure was defeated, with 63% of voters coming out against it.
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