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Pro-Payday Lending Constitutional Amendment U Establishes 18% Cap On Interest Rates, With A Catch

South Dakota Legislative Research Council

Two out of ten ballot measures up for vote in South Dakota deal with interest rates. Constitutional Amendment U establishes an 18 percent cap on interest rates in the state.

But there’s a catch.


According to the Attorney General’s explanation, if constitutional amendment U is passed any agreement with a lender may not charge more than 18 percent interest per year. That is if it’s a verbal agreement.

According to Consumer Credit Counseling of the Black Hills, if a loan isn’t agreed to in writing, it didn’t happen.

Steve Hickey, with the group South Dakotan’s for Responsible Lending, is co-chair of a group leading the charge against Constitutional Amendment U. He calls the amendment a "fake rate cap."

“It’s really not a rate cap at all. It actually ensconces their practices even more in terms of legality,” Hickey says. “What’s most concerning about this is that they’re going after it as a constitutional amendment. So, that would make it impossible for the legislature to change it. So, if you could imagine any industry in our state afforded constitutional protections from the legislature in terms of regulation, that’s just obnoxious. This is the last industry that we want to see have that green light.”

Hickey says all major church groups in the state are behind his group, which opposes the 18 percent verbal agreement amendment. Hickey’s group is floating a 36 percent rate cap ballot measure because he says the state legislature failed to rope in the payday lending industry…

“The sky is not going to fall,” Hickey says. “The payday lending industry is going to spend, we’ve been told, $10 million deceiving the voter this fall, acting like the poor will have nowhere to go. This industry emerged in the last 20 years and the poor managed as they manage before this industry came in and started getting a big piece of the pie. There are alternatives in these other states where they already capped the rates. So, the only people that are going to be hurt more are the payday lenders themselves.”

Multiple attempts over the last several days to reach South Dakotans for Fair Lending, the group in favor of the 18 percent verbal interest rate cap, were not successful.

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