Was ‘Dollar Loan Center’ in South Dakota wrongfully shut down? That’s the question before the South Dakota Supreme Court.
If you remember in 2016, South Dakota voters passed Initiated Measure 21, a new law that capped interest rates on payday loans at 36%.
Dollar Loan did that, but in 2017 the South Dakota Division of Banking determined Dollar Loan was charging high interest late fees and felt it was essentially the same thing it was doing before, so it revoked their license.
In front of the South Dakota Supreme Court on the campus of the University of Sioux Falls Monday, attorneys for Dollar Loan argue that their client should not have been shut down.
“On September 13th, 2017 the director of Division of Banking revoked my clients money lending licenses without providing notice or hearing as required under South Dakota law,” attorney Zachary Peterson said.
Peterson says Dollar Loan should have had a hearing to argue its case, but instead the director of the Division of Banking acted on his own which violated Dollar Loan’s right to due process.
“They go out and do an investigation, like a bank exam, they know what they think and then they have a hearing, so that argument really attacks the whole administrative process doesn’t it,” Justice Steven Zinter asked.
“Not given the precedent of this court, which says you have the decision maker making a decision prior to a hearing,” Peterson said.
Attorneys for the state contend that the Division of Banking didn’t need a hearing, because it conducted three examinations on Dollar Loan and determined it was not operating within the law.
“Dollar Loan was issuing loans in violation of any license and that they were short term consumer loans, second that the division concluded that those loans being issued violated the 36% cap in that when late fees are included finance charges resulted in a range from slightly over 300% to about 487% well above the voter approved cap of 36%,” attorney Paul Bachand said.
He says in essence that’s the same kind of loans Dollar Loan was offering before IM 21 passed.
“This new loan product was the same horse I’d say with a different saddle, Bachand said.
The Supreme Court will make a ruling at a later date. The justices will hear several more cases at the University of Sioux Falls for the next two days.