Carleton, Inc.
Consumer Lending Software

Compliance Alert, December 9, 2016

South Dakota- Update

There has been a great deal of activity since voters approved IM 21 with approximately 75% of the vote.  The Division of Banking has issued communications providing more details.

On November 22, 2016 Director Bret Afdahl issued a memorandum that stated the types of charges or fees to be included “in the annual rate calculations” include, depending upon the circumstances, the following:

Also, listed in the memo between the doc fees and credit insurance premiums were attorneys fees, and NSF charges.  It is still unclear how those traditionally post-consummation fees would affect the rate at point of sale.

On November 22, 2016 in response to requests for clarification of specific points in relation to IM 21, Divison of Banking General Counsel Brock Jensen opined that all money lenders licensed per SDCL Ch. 54-4 are subject to the IM 21 requirements.   It appears that dealers at the point of sale completing retail installment sales contracts are not subject to IM 21 but assignees who purchase the contracts will be expected to comply.

The following is our original summary of IM 21 from November 10, 2016.

South Dakota voters approved Initiated Measure 21 on November 8, 2016 which prohibits certain state licensed lenders exceeding a 36% annual rate on commercial and personal loans.

The measure applies to all money lenders licensed under South Dakota Codified Law Chapter 54-4.  The measure does not apply to state and national banks, bank holding companies, state chartered and trust companies and other federally  insured financial institutions.

The measure states:

   “However, no licensee may contract for or receive finance charges in excess of an annual rate of thirty-six percent, including all charges for any ancillary product or service and any other charge or fee incident to the extenstion of credit.  A violation of this section is a Class 1 misdemeanor.  Any loan made in violation of this section is void and uncollectable as to any principal, fee, interest or charge.”

The measure became effective once election results were certified on November 16, 2016.

Posted on Dec 09, 2016