Banking
Guidance for Money Lenders on Initiated Measure 21
Original Guidance on Initiated Measure 21
Below is a summary of Initiated Measure 21 (IM 21) which was approved by voters on November 8, 2016. It is our understanding the amendments to existing laws and new laws established in IM 21 will become effective on November 16, 2016, after the South Dakota Secretary of State's Office completes its official canvas of the votes on November 15, 2016. I would encourage you to immediately review IM 21 in detail.
The initiated measure prohibits all State-licensed money lenders licensed under South Dakota Codified Laws chapter 54-4 from making a loan that imposes total interest, fees, and charges (including all charges for any ancillary product or service and any other charge or fee incident to the extension of credit) at an annual percentage rate greater than 36%. The initiated measure also prohibits these money lenders from evading this rate limitation by indirect means. A violation of this measure is a misdemeanor crime. In addition, a loan made in violation of this measure is void, and any principal, fee, interest, or charge is uncollectable.
The initiated measure's prohibitions apply to all money lenders licensed under South Dakota Codified Laws chapter 54-4. The initiated measure does not apply to state and national banks, bank holding companies, other federally insured financial institutions, and state chartered trust companies. The initiated measure also does not apply to businesses that provide financing for goods and services they sell.
The provisions of IM 21 apply to all loans originated, refinanced, rolled over, renewed or flipped after November 15, 2016.
If you would like additional information regarding IM 21, or if you have any questions, please do not hesitate to contact the South Dakota Division of Banking at 605.773.3421.