Bills to rein in payday loans surface in Pierre
January 25, 2006 - Pierre, South Dakota
Bills regulating the 300 or so quick-loan shops in South Dakota have been introduced in the 2006 Legislature.
South Dakota's lack of an interest rate limit, which was aimed at luring banking companies, has fueled the quick-loan shops. Loans from the establishments typically last up to 30 days and can carry annual interest rates of 400 percent or more.
One bill, sponsored by state Rep. Mary Glenski, D-Sioux Falls, would amend the existing short-term lending law to add the definition of a consumer small loan, a short-term, nonrevolving loan of less $500 that's to be paid in a single installment.
"We didn't have a definition for consumer small loans before," Glenski said.
She said her bill would regulate short-term loans without alienating the credit card industry. It would eliminate a section that allows borrowers to extend - or roll over - a payday loan up to four times.
Another bill, introduced Tuesday by Rep. Joni Cutler, R-Sioux Falls, defines a short-term consumer loan as any loan to an individual borrower lasting six months or less. It would require lenders to disclose "any fee or charge, including the cost of a loan as an annual percentage rate" and any fee or charge that might be applied for delinquency. The terms of loans offered also would have to be displayed in any advertisement for the lender.
Bills usually are amended, so Bruce Cooey, who manages Dollar Loan Center stores in South Dakota, Utah and Nevada, said he has little comment.
"I'm sure whatever does happen or what does get passed will be reasonable. I can't comment on any of the specifics because I haven't had a chance to go through them," he said.
Brandi Dump of Sioux Falls said she still is paying off a $600 loan she and her husband took out 10 months ago. They try to pay at least $60 a week, which just covers interest.
"The fees on these loans, it's just ridiculous," she said. "You can't get out of it."
Payday lenders say the loans are meant to be repaid quickly, almost like an overdraft account.
Lawmakers said they fear the ability to extend the loan up to four times is what leads to an endless cycle of debt. A weekly $7.50 fee on a $100 loan, by the end of one year, adds up to $350 in fees alone.
Both bills have drawn bipartisan support. State Sen. Bill Napoli, R-Rapid City, a co-sponsor of both, said short-term lending is the most pressing issue for him this session.
"It's not a partisan issue," Napoli has said. "It's a people issue."
American News, as reported by the AP
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