Payday Lending Cap|Will Go to S.D. Voters

PIERRE, S.D (CN) - A ballot initiative capping short-term lending interest rates at 36 percent can go to voters in November, the South Dakota Supreme Court ruled, affirming a ruling in favor of a group fighting predatory lending.

The state supreme court Thursday affirmed a ruling from Hughes County Court, in Pierre.

South Dakotans for Responsible Lending, which led the initiative campaign, said the state's failure to regulate payday lending allowed "predatory lenders" to charge as much as 574 percent on loans, one of the highest rates in the nation.

A payday lender sued the state in June 2015, claiming the ballot language was misleading: that the proposal is meant to drive payday lenders out of business, as they could not survive with rates capped at 36 percent.

Erin Ageton, vice president of Select Management Resources, was the plaintiff. Select Management owns LoanMax, a payday lender in Rapid City.

Hughes County Judge Kathleen Trandahl quickly rejected the demand that the ballot language be rewritten, and the secretary of state said in late December that the initiative will appear on the ballot in this year's general election.

Writing for a unanimous panel of five last week, Supreme Court Judge Lori Wilbur ruled that "even if we accept that the proponent's true purpose with the initiated measure is to end short-term lending in South Dakota, that purpose and effect is more appropriate for political dispute and advocacy. There is no language in the initiated measure that specifically bans short-term lending in South Dakota. And, although a 36 percent interest rate cap on short-term loans for certain lenders might prompt those lenders to cease providing short-term loans, the initiated measure does not prohibit their continued operation."

Any legal measure can have a multitude of effects, Wilbur wrote, and the attorney general is not responsible for foreseeing each possible outcome.

"It is simply not for this Court or the circuit court to require the Attorney General to include every practical or possible effect of each initiated measure," she wrote.

"From our review of the Attorney General's ballot explanation, the Attorney General did not abuse his discretion, and the explanation is adequate."

Not surprisingly, Attorney General Marty Jackley was pleased with the ruling.

"Pursuant to South Dakota law, I have worked to provide a fair, clear, and simple summary of the proposed measure in order to assist our voters. I am pleased the Court has reaffirmed the fairness of my Attorney General Explanation," Jackley said in a statement.

Erin Ageton's attorney, Alan Simpson, told Courthouse News he was "disappointed," but that voters would recognize the truth.

"The court's decision recognizes that the attorney general had a duty to educate the public, and that this petition may well be a disguised effort to shut down short-term lending," he said.

"Events overtook this slow-moving case, and we are satisfied now that the message is out," Simpson said. "Voters know that this will shut down short-term credit. They will not be fooled by the '36 percent limit.'"

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