Lisa Furlong and the peddlers of Amendment U, the fake 18% rate cap, have demonstrated their willingness to lie to block Initiated Measure 21, the real 36% rate cap. Reviewing Furlong’s proponent statement for the usury amendment in the official 2016 Ballot Question Pamphlet leads me to contend that Furlong is breaking state law concerning false or erroneous information about ballot questions.
Review South Dakota Codified Law 12-13-16 (I emphasize the key phrase):
Any person knowingly printing, publishing, or delivering to any voter of this state a document containing any purported constitutional amendment, question, law, or measure to be submitted to the voters at any election, in which such constitutional amendment, question, law, or measure is misstated, erroneously printed, or by which false or misleading information is given to the voters, is guilty of a Class 2 misdemeanor [SDCL 12-13-16].
Now review the first two paragraphs of Furlong’s Pro statement on Amendment U (again, I emphasize key passages):
This measure places a strict 18% cap on interest rates, is far more stringent than that of other measures being proposed, and takes the extra step of amending the South Dakota constitution, which will ensure that the cap placed on interest rates are not undone or weakened by politicians.
This measure takes a balanced approach to protecting poor and middle-class people and families from predatory lending, while also protecting their access to money in cases of emergency. This measure places greater protections for borrowers in South Dakota by putting an 18% cap on interest rates right in the constitution – making it much more difficult for special interest groups and politicians to undermine or weaken it [Lisa Furlong, proponent statement on Amendment U, 2016 South Dakota Ballot Question Pamphlet, published August 2016].
Furlong has used the word “strict” before, in the misleading flyer her petitioners handed out last fall and in the rare press release she issued last August. As was the case with those 2015 statements, the 2016 statements I bold in Furlong’s ballot question pamphlet explanation are misleading and false. To understand why, we must review the language of Amendment U:
That article VI of the Constitution of South Dakota be amended by adding new sections to read as follows:
- No lender may charge interest for the loan or use of money in excess of eighteen per cent per annum unless the borrower agrees to another rate in writing. No law fixing an annual percentage rate of interest for the loan or use of money is valid unless the law provides borrowers the right to contract at interest rates as may be agreed to by the parties.
- No law fixing a rate of interest or return for the loan or use of money, or fixing the service or any other charge that may be made or imposed for the loan or use of money, for any particular group or class engaged in lending money is valid. Any rate of interest or charge fixed by law shall apply generally and to all lenders without regard to the type or classification of the lender’s business [Amendment U, as submitted 2015.08.10].
Amendment U imposes an 18% rate cap on loans made on oral agreements. Amendment U’s rate cap does not apply to loans with written agreements.
SDCL 54-4-70 requires that title loans be evidenced by a written agreement. On title loans, U is thus not a “strict” cap; it is a non-existent cap. It is not “more stringent” than IM 21’s 36% rate cap on title loans, nor does it provide “greater protections for borrowers”; U forbids any specific protection for title borrowers and annuls any protection for all borrowers signing written agreements, which under current law includes every South Dakotan taking out a title loan.
Wading into deeper water, I find SDCL 53-8-2 requires certain contracts be in writing. Among oral agreements that are unenforceable in South Dakota is “An agreement for a loan of money or for an extension of credit, which agreement may be enforced by a beneficiary for whom the agreement was made, including, but not limited to, vendors of agricultural goods, services or products.” That language suggests (and I invite the finance experts of my comment section to correct me, if necessary) that any loan, including ag loans, have to be written down to amount to a hill of beans in court. If my interpretation is correct, then Amendment U’s 18% cap on oral loans is a complete legal fiction.
Even if my interpretation is incorrect, I feel confident stating that no payday lender in South Dakota will let me walk out their door with fresh cash in hand without getting my signature. Either under law or under current business practice, Amendment U’s 18% rate cap applies to no significant loan currently offered by any lender affected by both Amendment U and Initiated Measure 21. Amendment U provides no “strict” or “more stringent” rate cap and no “greater” protection for borrowers. Amendment U restricts only the ability of the Legislature and the voters to put stringent caps on interest rates, a fact Attorney General Marty Jackley himself admits in his official explanation of Lisa Furlong’s fake rate cap.
Amendment U is unenforceable trick, and Lisa Furlong’s proponent statement is misleading and false. The latter makes Furlong guilty of violating South Dakota law.