A South Dakota House committee has broken the national trend and rejected a bill that would limit the interest rates charged by short term lenders in the state, reports KCAU-TV.
While many states are passing legislation to severely cap interest rates or eliminate the industry completely, South Dakota lawmakers see value in the short term loan business for consumers. Lawmakers on the panel rejected the bill because they believed that many people who use short term loans for nontraditional credit
have no alternative. Banking and trade groups lobbied against the legislation as well, because they believed the bill would have put many lenders out of business. The bill was sponsored by Representative Steve Hickey of Sioux Falls. He hoped to raise the licensing fee on short term and title loan businesses from $1,000 to $5,000 and cap the interest rate that they could charge from over 300 percent to 36 percent. Consumer advocate organizations argue that short term loan stores trap customers in a cycle of debt because of their interest rates. However, industry representatives hold that they offer consumers a way to get out of debt thanks to cash advance loans. When emergencies arise, some people don't have the ability to pay for them out of pocket, but short term loans give them an option.