New report could calm call for payday loan reform in SD
A proposal from the US Consumer Financial Protection Bureau could stifle the call to put interest rate caps on payday lenders at the polls in November, a political expert said Thursday.
It is estimated that 84% of all payday loan volumes in the country could be wiped out by regulation, a payday lending business group said, and as a result, voters might not care as much about rate caps as they go. November.
In its 1,334-page plan, the bureau asks payday lenders to check that borrowers can afford to repay them before offering short-term loans and prevents lenders from offering a series of loans that can trap borrowers. borrowers in a cycle of debt. The rules do not need congressional approval and will go into effect as early as next year.
University of South Dakota political science professor Michael Card said both a campaign to cap annual interest rates for payday lenders at 36% and an opposing group trying to allow lenders to sidestep an 18% annual interest rate cap as long as borrowers agree to run the bureau’s regulations to help their campaigns.
But we might be more successful in attracting South Dakota voters who tend to shy away from federal controls, he said.
“The 18% group will say, ‘That’s enough, we don’t need regulation anymore. What we have here is enough, ”Card said. “And for a lot of South Dakotas, that might work.”
And if the goal of this campaign is to prevent the 36% measure from gaining enough votes to become law, campaigning using the report could convince people to vote against both measures, he said. declared.
“They really don’t care about the ‘No’ for them as long as it means a ‘No’ on the ballot,” Card said. “They just want to block the plug.”
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Lisa Furlong and Bradley Thuringer, heads of committees supporting the 18% constitutional amendment and opposed to the rate cap, did not respond to calls and emails seeking comment Thursday.
Supporters of the industry’s interest rate cap effort will likely use the regulations to highlight the seriousness of the problem, Card said, and they could encourage the state to create its own cap if policies fail. federal efforts.
Reynold Nesiba, treasurer of the South Dakotans for Responsible Lending, said the regulation was a good start, but more needs to be done to reduce the amount of fees borrowers pay.
“We are pleased that the office is recognizing these loan products as flawed and establishing rules to curb them,” Nesiba said. “The CFPB rules just don’t go far enough to protect South Dakota families, the elderly, veterans and others trapped in debt. The best thing about Measure 21 initiated is that ‘it will reduce the annual interest rate on these loans from 500 percent to 36 percent. “
Of the 36 states that offer payday loans, the average annual interest rate is 391%, according to a report by Pew Charitable Trusts. And the 12 million Americans who take out the loans pay about $ 7 billion a year in fees.
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