Ruling: Owners of cash-advance businesses not public

Gov. Dennis Daugaard’s administration has won its bid to keep secret the names of people who own payday lending businesses following a ruling from the South Dakota Office of Hearing Examiners.

Hearing Examiner Catherine Duenwald ruled that the applications submitted by payday lenders, title loan companies and other cash advance businesses are not public. Duenwald’s opinion upholds a decision made last year by Bret Afdahl, the director of the South Dakota Division of Banking, to not turn over the records following an open records request by Argus Leader Media. The Argus Leader appealed Afdahl’s decision to the Office of Hearing Examiners on May 27, 2015.

Cash advance businesses are required to submit an annual application in order to receive a money lending license from the state. The application requires the disclosure of chief business executives, directors and individuals who own 10 percent or more of a business. The Argus Leader argued the information was public.

But Duenwald said that Afdahl was correct in withholding the information, saying his decision protects the public interest.

“The information identifying bank investors and owners may do harm to a person or business as well as the bank in which they have invested,” Duenwald wrote.

Cash advance businesses are the subject of two ballot initiatives that voters will decide on in the November election. One seeks to cap interest rates on loans at 36 percent; the other, sponsored by the payday lending industry, caps interest rates at 18 percent, but that rate could be exceeded if a borrower agreed in writing.

The industry argues that it is often the only source of financing for some individuals who can’t qualify for standard bank loans. A 36 percent cap on loans would drive those businesses from the state.

But industry critics say the loans trap borrowers in a cycle of debt because the loans come with interest rates and fees that can exceed 500 percent.

Reynold Nesiba, an Augustana University professor who is one of the leaders of the effort to cap rates at 36 percent, said he thinks the owners of cash advance businesses should be public and available on a state web site.

“Given that the entire industry is built on deception and false advertising, it’s no surprise to me that those payday bosses want to keep their identities secret,” he said.

Ironically, Afdahl has released money lender applications in the past, something the Argus Leader pointed out in its appeal. But Duenwald said the applications have since been updated and require more personal information.

Her decision could be appealed to circuit court.