SIOUX FALLS, S.D. — A short-term lender that recently began offering loans again at two stores in South Dakota after scaling down nearly all its business in the state because of a new voter-imposed interest rate cap has signaled possible plans to expand.
Dollar Loan Center last month filed for new money lending licenses at three more locations, all stores the company operated before the interest rate cap passed, documents the state released this week to The Associated Press show. High-interest loan opponents worry the business is growing again in South Dakota.
The South Dakota Division of Banking says the company is now making short-term loans in Rapid City and Sioux Falls, but it’s licensed for five stores. Whether the loans continue at all depends on a banking division investigation.
The financial regulatory office is examining whether the new loans comply with the 2016 rate cap law, which limited interest rates charged by businesses such as payday and auto title lenders to 36 percent annually. The voter initiative caused many businesses to close. Lenders predicted during the ballot measure campaign that the initiative would kill the industry in South Dakota because the rate cap would prevent them from recouping the costs of providing loans.
Dollar Loan Center declined to renew eight state licenses for 2017, leaving two remaining that weren’t making new loans, according to information the division released in January.
“No short-term lender in the state of South Dakota will be able to help you with these restrictions,” the company wrote in a post on its website shortly after Election Day. “The only way to fix this travesty is to voice your opinion.”
The banking division said in a statement last week that Dollar Loan Center is now offering loans at a 36 percent annual interest rate and charging late fees if they’re not repaid in one week. Rate-cap backers say the product violates the law and is a move to evade the limitation.
Company CEO Chuck Brennan didn’t respond to telephone messages from The AP including one asking whether the new license applications signal expansion plans. The applications for locations in Aberdeen, Sioux Falls and Watertown came in June 1, shortly before the company informed the banking division June 22 that it intended to start offering new loans.
Dollar Loan Center’s new “signature loans” come in $250 increments up to $1,000, according to the company’s website, www.dontbebroke.com. Someone who borrowed $250 would be charged a $25 late fee each week until the loan is paid off, while a $1,000 loan would incur a $70 weekly late fee.
Brennan said in a statement to the Argus Leader last week that the new loan product conforms specifically to the voter-approved measure. Democratic Sen. Reynold Nesiba, who helped lead the rate cap campaign, said that he thinks it’s an illegal, cynical product that’s designed to fail and doesn’t become profitable until the borrower defaults and gets trapped in debt.
“I worry that he’s offering these products. I worry that he’s back in business and expanding and continuing to prey on desperate South Dakotans,” Nesiba said. “I hope the Division of Banking expedites their investigation and makes a determination whether what he’s doing is legal at all.”
A spokeswoman for the Department of Labor and Regulation said in a Thursday email that she couldn’t provide any updates on the banking division’s inquiry or a timeframe for its completion.