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South Dakota Voters Approve 36% APR Cap on Short-Term Loans

November 10, 2016

SIOUX FALL, S.D. — Voters there approved an initiated measure aimed at capping interest rates on short-term loans in the state. Included in the cap are all charges for ancillary products and any other fees included in the extension of credit.

Initiated Measure 21, which was passed last Tuesday by 75.6% of voters, places a 36% APR all-in cap on loans from all state-licensed money lenders. Covered loans include commercial and personal loans, including installment, auto, payday, and title loans.

Under current state laws, there is no limit on how much interest lenders can charge on these loans. Excluded from the new cap are national banks or other federally insured financial institutions.

More than 60% of South Dakota voters rejected a competing measure, Constitutional Amendment U, that would have placed an 18% APR cap for verbal short-term loans. The only way state-licensed lenders could exceed the cap is if the borrower agrees to a higher rate in writing.

Amendment U was proposed by the payday lending industry to head off the rate cap proposed in Measure 21. It had warned voters that IM 21 could put an end to the payday loan industry in South Dakota if passed. With its passage, the measure will go into effect upon certification of the results by the state.

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