Quick-loan industry earning higher interest
South Dakota State Roundup
Published July 1, 2002 | July 2002 issue
South Dakota's short-term loan industry is gathering increased attention. The Sioux Falls Argus Leader published a special report on the industry in March, revealing what critics consider lending abuses but supporters call meeting a consumer need. The 2002 Legislature passed a law, effective July 1, which limits "payday" lenders to making loans not exceeding $500, with no more than four renewals. And many legislators in the 2002 session called for increased study of the industry, with the possibility of more legislative action in 2003.
South Dakota's relatively permissive lending regulations have led local banks to partner with financial service companies in Georgia, Michigan, North Carolina, Texas and Virginia to provide small, short-term, high-interest loans in those states. Since South Dakota law places no limit on interest rates, the partnership allows local companies to charge rates higher than allowed under their state regulations. (For more information on this topic, see fedgazette focus, October 2000.)