Marcia Hultman

Cabinet Secretary

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Banking

Guidance for Money Lenders on Initiated Measure 21


New! Additional Guidance on Initiated Measure 21

All South Dakota money lenders licensed pursuant to the provisions of South Dakota Codified Law (SDCL) 54-4 are required to comply with the provisions of Initiated Measure 21 (IM 21), which includes a 36 percent rate limit. Retail installment contracts are installment loans in South Dakota for purposes of SDCL 54-4. Financial institutions in South Dakota that service, acquire or purchase retail installment contracts are required to obtain and maintain money lender licenses pursuant to SDCL 54-4. As such, financial institutions in South Dakota that service, acquire, or purchase retail installment contracts are required to comply with the provisions of IM 21, and the other substantive requirements of SDCL 54-4.

The types of services, products, charges or fees that are to be included in annual rate calculations for purposes of the rate limitations imposed by IM 21 are “all charges for any ancillary product or service and any other charge or fee incident to the extension of credit.” See IM 21, Section 2. These services, products, charges, and fees may, depending on the circumstances, include vehicle service and maintenance contracts, official fees and taxes, guaranteed asset protection waivers, sales taxes, title fees, lien registration fees, dealer documentary fees, returned check fees, attorney fees, and credit life or accident and health insurance.

Finally, please note that the provisions of IM 21 became effective on November 16, 2016. South Dakota money lenders were required to be in full compliance with the provisions of IM 21 on such date.

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.

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.