The South Dakota House will consider reforming payday lending in South Dakota including determining a consumer’s ability to repay the loan before an issuer could grant it.
Representative Steve Hickey, R-Sioux Falls, introduced House Bill 1255 Tuesday, which he says will make "common-sense" changes to protect consumers.
Five key components of the bill include:
• Ability to Repay: The maximum indebtedness of short-term high costs loans a single borrower can have outstanding is $700 or 25 percent of their gross monthly income (whichever is less.)
• Transparent Pricing: No loan renewals or “rollovers.”
• Right to Cancel: Consumer has right to rescind a loan by close of business the following day.
• Extended Payment Plan: Consumer has right to an extended payment plan with no additional finance charge.
• Enforcement: The South Dakota Banking Commission shall promulgate rules and utilize technology to enforce all provisions of the law.
Last summer, Hickey formed a group called South Dakota Coalition for Reasonable Lending to put an interest rate cap on the 2014 ballot. Hickey says this bill is a compromise to bringing the issue to a vote, with leaders in the payday loan industry. 15 states have passed payday lending reform laws.