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Trump Revoking South Dakota’s 36% Payday Loan Interest Rate Cap

I know it’s hard to get South Dakotans to see a connection between ballot measures and candidates. It’s hard to get South Dakotans to see that Donald Trump is bad for South Dakota.

But hey, South Dakota: in 2016, at the same time that 61.5% of you voted to make a spoiled Manhattan billionaire and TV star your President, 75.6% of you voted for Initiated Measure 21 to cap payday loan interest at 36%. More of you hate the lies and abuses of the payday loan sharks than hate Hillary Clinton.

Now Donald Trump is revoking that 36% rate cap by executive fiat:

Donald Trump’s finance czars had another idea. In November, the Federal Deposit Insurance Corporation (along with the even more obscure Office of the Comptroller of the Currency) floated a permanent loophole for payday lenders that would essentially make the South Dakota law, and many others, moot—they could launder their loans through out-of-state banks, which aren’t subject to state caps on interest. Payday lenders arrange the loans, the banks issue them, and the payday lenders buy them back.

…The FDIC rule would override a 2nd Circuit ruling, Madden v. Midland Funding, that says state usury laws can follow a loan around even if they’re sold to an out-of-state buyer. The FDIC rule is based on a controversial doctrine called “valid-when-made”: As long as a loan starts out legit, the bank can sell it on, with the same interest, to anyone. If the bank lends you a dollar at 1,000 percent interest—a real rate that payday lenders actually charge—and they’re not bound by the state rule, anyone can buy that loan from the bank and keep charging that 1000 percent. According to the National Consumer Law Center, which calls the FDIC rule the “rent-a-bank” proposal, at least five FDIC-regulated banks are now facilitating ultra-high-interest loans in 30 or more states. The motivation is obvious: The banks get a cut of a hugely profitable business [Daniel Moattar, “Trump to Payday Lenders: Let’s Rip America Off Again,” Mother Jones, 2020.02.11].

Trump to South Dakota
Here’s what I think of your rate caps on my loan shark pals….

This dirty trick would allow Chuck Brennan and other unscrupulous usurers to come back and abuse South Dakota. They couldn’t just open up their loan-shark shops on their own; they’d have to partner with the big banks who’ve been lobbying for this lucrative opportunity and give them a piece of the action. But half a pie is better than no pie and would still let Brennan et al. get back into charging vulnerable South Dakotans triple-digit interest.

Such is the reward an industry gets when it spends about a million dollars on conferences at Trump properties. Reciprocal back-scratching for rich sociopaths who subvert the will of the people—the rent-a-bank scheme captures Trumpism perfectly.

In a rare instance of standing for South Dakota against Trumpism, Attorney General Jason Ravnsborg signed onto a letter with the A.G.s of California, Minnesota, New York, and 18 other states opposing the rent-a-bank deregulation as an illegal preëmption of state law and usurpation of Congressional authority (although casual penmanship analysis shows his signature conveys the least vigor and character of the bunch).

The U.S. House Committee on Financial Services held the first of two hearings on the rent-a-bank schemes Trump would foist on the states last Wednesday. The committee will hear more on the issue on February 26. There are various bills pending in Congress that would check Trump’s loan sharks and make South Dakota’s 36% rate cap national. Neither Dusty Johnson, John Thune, nor Marion Michael Rounds have signed on yet as cosponsors of these useful reflections of South Dakota values.

The rent-a-bank scheme is just the latest in a string of examples of Donald Trump working against the interests and values of the South Dakotans who proudly buy his crap. At what point do South Dakotans wake up from their (white) nationalist fantasy and realize that electing a New York City con man to run the country is the opposite of what South Dakotans really want?


  1. leslie 2020-02-12 07:57

    Democrat Susan Wismer, CPA continues to sound alarm for secretive $20 B trusts “residing” in SD because of our pushover Republican legislature, governor and eager lawyers and accountants. A recent (2018) RCJ Bob Mercer (Janklow started the SD trust task force) article:

    The South Dakota Trust Association for the first time sent a lobbyist, lawyer Terra Fisher of Pierre, to the legislative session last year.

    What set up South Dakota was a change the Legislature made for Homestake Mining Co. in 1983. Lawmakers removed the 100-year cap so a business could operate in perpetuity.

    Returning members of the task force are Frances Becker and Patrick Goetzinger of Rapid City; Thomas Simmons of Vermillion; and Jennifer Bunkers, Anne Marie Feiock, Bradley Grossenburg, Peter Randazzo, Carl Schmidtman and Mark Sivertson of Sioux Falls. Dixie Hieb of Sioux Falls and Jim Riswold of Dell Rapids are new.

    Trusts chartered in South Dakota can operate elsewhere in the nation using trust service offices. During calendar 2017, the division approved applications for nine new charters in South Dakota and five trust services offices in De Pere, Wis.; Sioux Falls; Bloomington, Minn.; Miami, Fla.; and Brookfield, Wis.


    Rep. David Lust, R-Rapid City, is a past chairman for the task force. Lust said he wasn’t privy to the governor reworking it. He doesn’t see much impact on the current legislation.

    (He shares the same law firm with Geotzinger and Indian voting buster Sarah Frankenstein. He has some deniability along with Gov Daugaard.)

    Sen. Jeff Partridge, R-Rapid City, is the lead Senate sponsor of one bill. “The trust task force was rooted in the governor’s office but overseen by the Legislature,” Partridge said. “Governor Daugaard has proposed that it is no longer necessary to insist that this is a ‘Governors’ task force because it has solid backing by the Legislature, industry experts and the people of South Dakota.”

  2. leslie 2020-02-12 08:15

    SD REPUBLICAN elected simpletons are exploited by such rent -a-bank schemes, and rent-a-box trust residents schemes, designed by those who bring you “the next big thing” for themselves.

  3. Bob Newland 2020-02-12 09:09

    He’ll be great. Jes let ‘im do ‘is job.

  4. jerry 2020-02-12 09:39

    More Derivatives, what could go wrong? Hello 2008, we missed you.

  5. mike from iowa 2020-02-12 10:03

    Wingnuts want to make permanent all the damage they can inflict upon America.

  6. jerry 2020-02-12 11:31

    Invest a couple of hundred bucks in a passport…you’ll thank me later.

  7. o 2020-02-12 13:02

    A little more of the Golden Rule: who ever has the gold makes the rules.

  8. Debbo 2020-02-12 15:30

    This is what despotic psychopaths do.
    Every day I hate him more for the way he casually and carelessly hurts people.

  9. scott 2020-02-12 16:55

    This is basically what Janklow did to let the Big Banks charge higher interest rates on credit cards by operating out of South Dakota; we lifted the credit interest cap for them.

  10. Pat Meyer 2020-02-12 20:19


  11. Susan Torres 2020-02-13 00:20

    I know you’re preaching pretty much to the choir here ( the small but dedicated SD Dems), and I am one of them. But belittling SD Republican voters does not give you much if any cred with what you admit yourself is the majority of the state’s population. So, …why?Admittedly, SDakotans voting against their own self-interest is frustrating, and this last salvo by tRump is so outrageous, but you let your emotions get the better of you this time. Do better if you want to gain a wider audience.

  12. mike from iowa 2020-02-13 08:12

    Speaking only for myself, Ms Torres, South Dakota wingnuts are swamp dwellers and you have to be willing to get in the slime to engage them.

    Speaking truth to power goes over wingnut heads because they are already sunk in the mire and they aren’t able to process real truth from Fake Noize propaganda. It isn’t that us Dems are arrogant, wingnut juxtaposition makes it seem like we talk down to them.

  13. Cory Allen Heidelberger Post author | 2020-02-13 08:32

    I don’t need their “cred”, Susan. I need to point out the truth: Many voters who supported the 36% rate cap are now seeing the man they voted for for President at that same election revoke their vote. Voters should be mad about that. Voters should set aside the racism, sexism, and cult of personality that makes them vote for jerks like Trump and vote for candidates who support real policies that do real good.

  14. Eve Fisher 2020-02-13 17:33

    Time to get in touch with our Representative, Dusty Johnson, and urge him to support H.R. 5050, and Rounds and Thune in the Senate for their version, S-2833, the Veterans and Consumers Fair Credit Act (which would cap interest rates at 36% for all consumers). Granted, they probably won’t – but it’s worth a try.

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