Payday lending bill killed in the House
State lawmakers blocked a measure Wednesday that could have made futile an initiated measure set for the November ballot, but a similar bill could re-emerge in the Senate.
The House of Representatives on a 21-47 vote killed a bill that would insulate the payday lending industry against mandatory interest rate caps.
The measure would've voided the effect of Initiated Measure 21, which would cap annual interest rates for payday lenders at 36 percent.
The battle between lawmakers in the House represented just one front in an ongoing war between the payday lending industry and its opponents.
Both sides issued collected petitions for ballot measures, then challenged Secretary of State Shantel Krebs' report that the other had received enough signatures. Both challenges are being investigated.
And in the Supreme Court, payday lending proponents have said Attorney General Marty Jackley didn't accurately describe what payday lending opponents' 36 percent measure would do in writing his explanatory statement for 2016 ballots.
"These out-of-state payday lenders have all the money in the world to bring lawsuits, circulate petitions and lobby on legislation and that's what they're going to have to do to keep the industry alive," Steve Hildebrand, a sponsor of the 36 percent measure, said.
Hildebrand said the South Dakota residents and a majority of their legislators have indicated that they don't want the industry to continue in the state without restrictions. He and other opponents including religious groups, social workers and the AARP said the measure takes the decision out of the hands of voters and could help facilitate predatory lending practices.
The bill's supporters including industry lobbyists, store owners and free market advocates said the bill would help payday lending facilities keep their doors open in the state and would keep the short-term loan option open for South Dakota residents.
Brett Koenecke, lobbyist for payday loan companies Advance America and Check into Cash, told the House State Affairs Committee that the bill is intended to protect the industry against the caps. He said voters have already supported a constitutional amendment that would cap interest rates in South Dakota at 18 percent annually but allow higher ones if the borrower agrees to them.
“I’m here to remind you that 60,000 people signed petitions saying it should be left up to the marketplace and put between the parties to the contract," Koenecke said. “There are two things on the ballot this fall, not just one. I don’t have a crystal ball as to who wins the election this fall, but the people at risk, the people that offer loans and stand up here and have their shops open across South Dakota have a lot at risk and so do their borrowers.”
Proponents on the floor said the bill protected an industry that many low-income South Dakotans use and need. They said capping interest rates would effectively kill the state's payday lending industry, driving some to seek out unregulated lending services.
"Regardless of what's on the ballot, this is a good piece of legislation," Rep. Tim Rounds, R-Pierre said. "For me this is another tool for our citizens and those who live paycheck to paycheck."
But opponents of the bill and the 18 percent amendment said it would allow lending groups to trick consumers into signing on for interest rates greater than they can afford.
“We need to let this dishonest and manipulative industry know that we in this great state will handle decisions on payday loan issues with our own goals and without their underhanded interference,” Rep. Karen Soli, D-Sioux Falls, said.
Hildebrand said he didn't doubt that lawmakers would hoghouse a Senate bill to attempt to block the interest rate caps. Hoghousing is a legislative procedure that allows a lawmaker to amend and essentially gut a bill, changing its effect.
Erik Nelson, a lobbyist for AARP, said the organization would look out for other legislative efforts to prohibit interest rate caps.
"We're not going to let our guard down because the payday lenders keep trying to work their way in," Nelson said.
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