South Dakota Payday Loan Law and Legislation

South Dakota used to have a very aggressive payday lending industry for years. Its lending terms were one of the most lenient in the country as no usury laws governed them. Lenders could charge triple-digit interest rates that in some cases could reach 574%. However, the fun ended in 2016 when the state Legislature reenacted usury cap of 36% for all small cash loans. Currently, payday loans are officially legal in the state, however, the number of payday loan stores has considerably decreased since the cap was introduced.

South Dakota Payday Lending Statutes

According to the Initiated Measure 21 enacted on Nov. 16, 2016, and S.D. Codified Laws 54-4-36 et seq., payday lenders can operate in the state, however, they have to abide by the state restrictions.

Payday loan companies should be licensed by the Division of Banking to offer a payday loan in the state of South Dakota. When applying for the license, a lender should provide the business name, address, and the surety bond proof.

Check the list of current licensees (payday lenders are among them).

A written notice with all the terms should be given to the borrower, together with the contract, which must be understandable and contain the required information. A lender in South Dakota should defer the check for a particular time period as indicated in the agreement.

Loan Amount in South Dakota

• Payday loans in South Dakota cannot be more than $500.
• The loan may be renewed 4 times providing all fees are covered before the agreement renewal.

Rates, Fees and Other Charges in South Dakota

• “No licensee may contract for or receive finance charges pursuant to a loan in excess of an annual rate of 36 percent, including all charges for any ancillary product or service and any other charge or fee incident to the extension of credit. A violation of this section is a Class 1 misdemeanor. Any loan made in violation of this section is void and uncollectible as to any principal, fee, interest, or charge.” (Initiated Measure 21)
• Finance charges should not exceed $1.39 for a $100 loan given for 2 weeks

The Maximum Term for a Payday Loan in South Dakota

• The minimum loan term in South Dakota is 13 days but there isn’t the maximum term.
• 4 roll-overs are allowed for a loan.

Consumer Information

Attention
From July 2020, lenders are not required to check a borrower’s ability to repay a loan.
Be careful, evaluate your financial situation, don’t get into a debt trap.
The rule was changed by the CFPB.

• Lenders are forbidden to take any criminal actions against borrowers.

To find the information about payday lenders of the state you may visit the South Dakota Division of Banking.

Regulator: Complaints & Information

South Dakota Division of Banking

Address: 1601 N Harrison Ave #1, Pierre, SD 57501
Phone: 605-773-3421
Fax: 866-326-7504
Url: https://dlr.sd.gov/banking/
File a Complaint: https://dlr.sd.gov/banking/consumers/filing_complaint.aspx

Submit a Complaint to the CFPB

Number of South Dakota Consumers Complaints by Topics

According to CFPB Consumer Complaint Database

• Fraud and threat ( 25 )
• Charges from account ( 12 )
• Not exiting debt ( 7 )
• Not requested loan ( 4 )
• Loan to return ( 2 )
• Lender is not available ( 2 )

The History of Payday Loans in South Dakota

• 1980 – South Dakota eliminated its usury ceiling.
• 1990s and 2000s – High-interest, short-term loans, namely, payday and car-title loans, came into the state. In 2000, 95 businesses offered one or more alternative financial service in South Dakota and 40 of them offered payday loans. South Dakota required payday lenders to be licensed, however, it placed no caps on fees. The situation stayed the same for more than 15 years.
• 2006 – The Military Lending Act effectively capped payday loans offered to the military at 36% APR. This federal law has no exceptions, thus, no lender in South Dakota is now allowed to offer loans to the military in excess of 36% APR.
• June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (expected in November 2020).
• 2016 – South Dakota decided not to wait for the federal decision. The Constitutional Amendment U was proposed. The amendment would limit the ability to set statutory interest rates for loans. However, it didn’t pass.
• 2016 – Nevertheless, it was closely followed by the Initiated Measure 21 that was approved by votes with 76% in support. It effectively capped payday loans at 36% APR and did not allow the industry to create any further loopholes.
• 2017 – In the result, 121 lenders did not renew their licenses and chose to leave the state; 75 stayed until they collected on existing loans.

[Updated As of February 2020]