If you've ever taken out a payday lending loan, you know they can sometimes be hard to payoff because of the high interest rates that are attached to them. Now one South Dakota lawmaker wants to put some restrictions on such loans to help working families and the poor from being trapped in what he calls "a crippling cycle of debt."
Payday loan companies claim to help families who struggle with money, but some say they make a bad financial situation even worse.
A bill sponsored by State Representative Steve Hickey wouldn't limit the interest rate, but instead the amount of the loan. He says many states have shutdown payday practices, but his bill won't.
"My bill allows them to stay in the state prospering, but it makes them behave. It regulates the industry," Hickey said.
Under the bill, the most anyone could borrow from a payday lender is $700 or 25 percent of their gross monthly income, whichever is less.
The bill also creates a statewide database to track people taking out multiple loans.
"If you take out a loan, it goes into a system and says whether you can take out a loan. Do you have the money? Do you make enough to pay it back? Simple 101 lending types of things are in the bill that this industry presently doesn't abide by," Hickey said.
Chuck Brennan, who owns the Dollar Loan Center, is opposed to the bill.
"The bill is not good for South Dakota and there's not a problem with payday lending in South Dakota," Brennan said.
He also objects to the database.
"I don't know that people want every other loan company knowing they have money out; it's kind of a private issue in the first place," Brennan said.
Brennan says the bill is unnecessary.
"There's not a rash of complaints anywhere. As a matter a fact, by checking up with the Financial Division of South Dakota, in the last year there were less than 24 complaints statewide and we are talking tens of thousands of customers," Brennan said.
The House Commerce and Energy Committee will hold a hearing on the measure Wednesday.