A lobbyist for the South Dakota payday loan industry says the industry is well-regulated and there’s no need for the state Legislature to do anymore right now after tweaking the laws several times in recent years.
Short-term credit exists to help people who can’t get loans elsewhere, and too much regulation could stifle competition and push interest rates higher, said Rex Hagg, a Rapid City lawyer representing the South Dakota Short Term Lending Association.
“I guess all we’re asking is, we have this in place, let’s see if it works,” Hagg said. “I think we’ve come an awful long way, and I think it’s working pretty well right now.”
Hagg’s comments came during a meeting of an interim legislative committee assigned to review the regulatory agencies under the state Department of Revenue and Regulation. One of those agencies is the state Banking Division, which regulates moneylenders, including the faxless payday advance lenders.
“The more you regulate, those costs get tacked on,” said Hagg, a former state legislator. “Some regulation is needed, and it’s good. But we’re there.”
Payday lenders generally offer loans of two weeks to 30 days.
Cathy Brandner, deputy director of the Banking Division, said the current law, changed last year, limits such transactions to $500 from one lender at any one time. The borrower generally writes a check, dated when the bad credit payday loan is due, to repay the note. The loan can be renewed up to four times, but each time, the borrower must repay at least 10 percent of the original loan.
Before the change, the law simply had a $500 limit, Brandner told the committee.
The contract also must list the annual percentage rate, or APR, even though many of the payday loans or title loans are for two weeks to a month, she said.