SIOUX FALLS, S.D. (KELO) — South Dakotans are saving money after a voter-approved payday loan cap in 2016, according to a new report from the Center for Responsible Lending.
A ripple effect of the payday loan world is still felt in South Dakota as thousands of lawsuits have been filed in just the last few years against people who defaulted on their triple-digit interest loans. We discovered more than $1.4 million worth of lawsuits won against payday loan customers, all from just one lender.
The CRL report is called “The Sky Doesn’t Fall. Life After Payday Lending In South Dakota.” The non-profit organization finds credit unions are seeing an increase in usage for other types of loans, including a “payday alternative loan” capped at 28% interest.
Despite interest rates being capped for several years, South Dakota’s court system is filled with lawsuits with interest rates in the triple digits.
KELOLAND News looked at some of the thousands of cases moving through small claims court from just one payday lender. Dollar Loan Center was one of South Dakota’s most notorious payday lenders until it was shut down by the state. It has filed many cases since the 2016 voter-approved cap was passed.
Dozens of cases remain open from people who haven’t paid their loan balances.
These cases also gave us a unique look at how the payday loan industry worked in South Dakota.
In a KELOLAND News analysis below, we go in-depth on five cases to learn how they got so expensive for the borrowers.
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CRL says this information shows a cycle of debt trap, which is coming to fruition as legal consequences continue into 2020.
“Data show that over 75% of payday lenders’ fees come from borrowers taking out 10 or more loans in a year,” the report said. “The harms of the debt trap that can come from what starts as one small dollar loan, with borrowers still facing the consequences of these loans in legal proceedings years later.”
In South Dakota’s small claims court, the lenders often win by default because the borrower doesn’t show up to court. The lenders have the ability to go after property, garnish wages and block the registration of driver’s license or plate renewal.
In the past decade, some debt collectors impersonated law enforcement to collect money, according to South Dakota’s attorney general. They would threaten legal action, an arrest or even physical violence saying they were “criminal investigators.”
CRL also asked South Dakotans how they feel after the law change. 76% felt South Dakota was moving in the right direction and 77.4% said they feel financially optimistic.
Looking ahead, CRL is worried about a loophole for fast cash in South Dakota and how the federal government may soon solidify the loophole.