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Judge Boots Ageton Lawsuit; AG’s Ballot Explanation of Rate-Cap Initiative Stands

Sixth Circuit Judge Kathleen Trandahl has rejected Erin Ageton’s lawsuit against Attorney General Marty Jackley for what she called an incomplete explanation of the proposed ballot measure to cap interest rates at 36%.

While I’d love to see someone win a big lawsuit against the new National Association of Attorneys General president, I’m glad it didn’t happen on this case. As I detailed when payday lending exec Ageton filed this suit last week, Ageton was asking the court to order Jackley to step beyond the legal requirements of his office and peddle her industry’s political arguments against the rate-cap initiative. While I don’t have a copy of Judge Trandahl’s ruling yet, it appears she recognizes that in providing a ballot explanation, the Attorney General acts as a legal advisor, not an economist or soothsayer on what a given ballot initiative might do if passed.

"We'll pay off other title loans"—that's how the predatory payday lenders hook their customers in a cycle of debt. Photo from a roving reporter at 41st and Western, Sioux Falls, 2015.06.13.
“We’ll pay off other title loans”—that’s how the predatory payday lenders hook their customers in a cycle of debt. Photo from a roving reporter at 41st and Western, Sioux Falls, 2015.06.13. (Click to embiggen!)

Judge Trandahl took a little longer than expected to issue this ruling, perhaps because Ageton sandbagged her with four exhibits, 137 pages of what Ageton said backed up her case. Those exhibits did no such thing. The four papers, two of them commissioned by the payday lending industry, all talked about the economic impacts of capping interest rates. None of them made the legal case that the Attorney General is obliged by South Dakota law to make such economic arguments in his explanations of ballot measures. The first exhibit, this non-peer-reviewed paper for the Northwest Area Foundation, actually undermines Ageton’s argument. Ageton claims that capping interest rates at 36% will force her payday lending company and all other payday lenders out of business in South Dakota. The NWAF paper offers no such certainty, saying that payday lenders may close under a rate cap but pointing out that some payday lenders still operate and that the evidence of doom for lenders under rate caps is “inconclusive or incomplete” [p. 6]. The NWAF paper acknowledges that if payday lenders choose to leave the market, banks and credit unions can fill the short-term lending gap with cheaper products [p. 7].

The payday lenders still won a small victory, delaying the circulation of the rate-cap initiative petition by a couple of weeks. However, they still have until November 8 to gather the 13,871 signatures required to place the measure on our 2016 general election ballot, and I suspect the cross-partisan cooperation on this bill will easily overcome that Sioux Falls paper’s continual propaganda on behalf of the payday lending industry. (Really, how many updates do we need to hear about one business’s construction?)


  1. Rorschach 2015-06-20

    My father once gave my brother a new car. Paid in full. My brother took out a title loan on it. Defaulting on a loan of under $3,000 he lost the car. The title loan company was supposed to sell the car in a commercially reasonable manner and pay my brother the difference between the sale price and the lower amount my brother owed on the defaulted loan. The title company simply kept the extra several thousand dollars hoping nobody would notice, and only the intervention of a lawyer months later disgorged a settlement from the title loan company. Crooked.

  2. grudznick 2015-06-20

    I find it hard to believe that young Ms. Agethon is the head of such a corporation. She seems far to nice to do that and does not look like a power broker in the arm breaking business. I myself have not decided if this type of business should continue in the great state of South Dakota. Mainly because if people were smarter and worked harder these business would just collapse. So I can’t feel very bad for the people who make bad decisions. That is why they are probably on welfare in the first place. Bad decisions and not working harder.

  3. grudznick 2015-06-20

    Seems to me, Mr. Rorschach, your brother made a poor decision.

  4. caheidelberger Post author | 2015-06-21

    Grudz, she’s VP. In your comments about Ageton herself, you’re just playing with us. Stop.

    Blaming individuals for their poverty and other misfortunes (harkening back to the money gospel that arose after the Civil War, the idea that poverty is God’s punishment for sin) does not justify allowing predatory lenders to exploit that misfortune.

  5. Donald Pay 2015-06-21

    One thing I noticed living near East North Street in Rapid City is the almost simultaneous growth of the gambling industry with the growth in payday lending and title loan outfits. They seemed to spring up together once video gambling was voted in. A gambling den would be in one former convenience store, and right across the street, you would have a payday or title loan outfit.

    When I moved to Madison, WI, in 2001, I was struck by the absence of this industry here. I saw only one payday loan outfit, in a poor section of town. There were no video lottery dens here, just Dejope bingo hall, owned by the Ho-Chunk. Sometime in the last 5 years they turned the bingo hall into a casino. Now I’m seeing more payday loan outfits.

    I have to wonder if these industries feed off each other to such an extent that getting rid of one would hurt the other.

  6. Lynn 2015-06-21

    Donald makes an excellent point. There have been a few apologists that are against this attempt to cap rates on these joints have stated that the customers of these places might resort to crime or the mob to secure the funds they need. That seems to be a far fetched scare tactic to me.

    Remember the 80’s when the farm economy was in the tank and had a negative ripple affect on main street and elsewhere in our South Dakota communities? 12.9% to 15% interest rate was advertised as a great deal on buying a new car? There was one alternative finance company in the town I grew up in that had been in business for years and I don’t even remember any pawn shops and zero rent to own furniture stores.

    I do remember about the time video lottery was legalized in South Dakota all these other businesses started to pop up. A major issues that irked many citizens in this particular SD city was that the city council and mayor were trying to have the city cash in on tax revenue with this supposed “gold rush” that they lacked regulations on how many of these video lottery dens would go up and where. These places were popping up everywhere and it transformed the impression of what type of city we had and what values we had in our own residents. It was like a sickness!

    As Donald mentions above it was not long after that the other businesses started popping up such as pawn shops, rent-to-own furniture stores and then the payday loan joints popped up everywhere. About the only things missing in this picture are a continues lack of investment in our education system, more CAFO type industries, increase in temporary immigration worker visas to help suppress wages/increase profits and full legalization of recreational drugs.

  7. Bob Newland 2015-06-21

    Seems to me, Grudz, your mother made a poor decision.

  8. Lynn 2015-06-21

    Unfortunately Pandora’s box has been opened here in South Dakota and even if this initiative passes where do you stop? The payday loan industry is very resourceful in finding loopholes and will fight like hell to preserve their industry. What is realistically achievable? Do you think it is politically possible to repeal video lottery?

    It seems more realistic to really promote educating those who might fall into these traps on the front end with financial management and what options they have along with the pros and cons out there.

    Carrying minimal debt, having a clear mind free of mind altering drugs and not being a slave to addiction is power!

  9. leslie 2015-06-21

    6.5% of 12 year olds use marijuana regularly.

    marijuana use leads to addiction.

    addiction leads to everything we are talking about here. screw up the kids ability to be personally responsible, and you have a problem of gigantic proportions in american/world society for life. addiction does not go away and it is barely treatable. but, if you like jails and out-of-control cops, go for the easy money, the easy happiness, folks!

    erin ageton for role model of the year!!!

    see Nora Volkow, MD, youtube, NIH, NIDA, twitter, ect.

  10. Lynn 2015-06-21


    Bullseye! If they are a slave to any of those mentioned above how will they have the power to get out of a bad/unhealthy employment situation and take a risk and find something better, better themselves or take a stand and fight to make a positive difference? Power is having latitude, an escape plan and mobility. Life is movement not stagnation or going backwards.

  11. daleb 2015-06-21

    In SD our politicians justify a lot of bad behavior as personal responsiblity. The state sponsors gambling, video lottery, scratch tickets, alcohol sales, usury. The tradeoff for them is tax money into the state coffers. Then when anyone says maybe this is a bad idea the first thing the politicians say is that the money wont be there to fund education. Then throw out the idea of imposing an income tax if the tax money is lost. Things are so messed up now there are no more simple solutions. Legalizing marijuana wont fix anything. Tightening usury laws is more of a step in the right direction.

  12. grudznick 2015-06-21

    There is, as Mr. Pay points out, an abnormally high number of pawn shops on East North Street. More than one would think are needed. I hope the city does something with zoning to fix that. East North Street seems to be a magnet for laundromats and pawn shops. On one hand you might think it should all be spread out evenly around the town, but on the other it is kind of good it is all crowded into one part of town so people can avoid it. Better zoning is needed.

  13. caheidelberger Post author | 2015-06-21

    **”no more simple solutions”**—star that quote from Daleb!

  14. caheidelberger Post author | 2015-06-21

    Donald, interesting observation. I find this 2000 guide for treating problem gamblers lists payday loans as a possible warning sign of problem gambling.

    If the hickey-Hildebrand initiative succeeds, watch out for payday lenders to go online and plant their servers and call centers on the reservations. It’s happening with the Otoe-Missouria tribe in Oklahoma, where a Connecticut lending regulator says American Web Loan is “committing criminal usury and hiding behind this claim of sovereign immunity.” American Web Loan’s trailer-offices are out back of the tribal casino. The Lake Superior Chippewa on the Lac Vieux Desert reservation in Michigan also run an online short-term lending operation and a casino. The Cheyenne Sioux tribe has played ball with on online lender for a few years—last March, Missouri Attorney General Chris Koster reached a deal with the operation (which was operating under eight different names) to pay refunds and stop making loans to Missouri residents.

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