Amendment U: Fake 18% Rate Cap

Amendment U is a trick. Bankrolled by the company that runs North American Title Loan, Amendment U (think “U” for “Usury”) is an effort to confuse voters, prevent them from voting for the real 36% rate cap in Initiated Measure 21, and trick South Dakotans into writing into the state constitution a guarantee that payday lenders can charge interest rates as high as they want.

Key Provisions:

  1. Amendment U pretends to cap interest rates on all loans at 18%, but only on oral agreements.
  2. Amendment U allows lenders to charge any rate they can, as long as borrowers sign a written agreement.
  3. Amendment U immediately annuls IM 21 if passed and make it impossible to enact by law any other real cap on interest rates by requiring that any rate cap include the loophole that the lender and borrower can agree to any rate they want.
  4. Amendment U further prevents South Dakotans from enacting any rate of fee cap on payday lenders or title lenders specifically; any such cap must apply to all lenders.

Full Text: Amendment U, “An initiated amendment to the South Dakota Constitution limiting the ability to set statutory interest rates for loans.”

That article VI of the Constitution of South Dakota be amended by adding new sections to read as follows:

  1. 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.
  2. 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.

Read More:

  1. John Tsitrian, “SD Ballot’s Constitutional Amendment U? It’s a Scam,” The Constant Commoner, 2016.09.21.
  2. Liz Farmer, “Like the Industry, Payday Loan Ballot Measures Mislead Voters,” Governing, 2016.08.24.
  3. Dakota Free Press coverage of Amendment U
  4. Sioux Falls Area Chamber of Commerce issue brief on payday lending ballot measures, August 2016
  5. C.A. Heidelberger, “Payday Lender Lobby Proposes Constitutional Amendment to Thwart Interest-Rate Cap,” Dakota Free Press, 2015.07.13


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