Wednesday, September 21, 2016

SD Ballot's Constitutional Amendment U? It's A Scam

     Talk about an insult to the collective intelligence of South Dakota voters, Constitutional Amendment U on November's ballot is beyond belief in the scope of its contempt for people's
A Constitutional Issue?

ability to think.
 The Amendment ostensibly limits the ability of lenders to exceed an interest rate of 18% unless both lenders and borrowers agree to a higher rate.   I don't know who came up with this doozy of misrepresentation, but I imagine the payday lending industry is hoping this effort at pulling a fast one on our state's electorate passes muster come November.
    I suppose the effort has come as an electoral "counter-offer" to South Dakota voters who will also be voting on another payday lending issue--Initiated Measure 21--that will absolutely cap payday lending rates at 36% if passed.  Muddy as the waters have gotten on this thing, informed voters really need to concentrate on the issue in order to understand what's happening.  IM 21 is an assault on the payday lending industry, probably crippling it for good because the business can't make a go of it by loaning money at 36%.  Even though I oppose IM 21 on free-market, libertarian grounds, I respect the supporters of it because they want to curb what they consider to be abusive lending practices that snare a lot of financially hurting South Dakotans into an endless cycle of rolling over payday loans.
     Those "rollovers" compound debt upon debt, often driving up real interests rates into triple-digit amounts.  The payday lenders make their money by perpetuating that cycle, which would be ended if IM 21 passes.  I think IM 21 has a real chance at succeeding, and I'm sure the industry it targets feels the same way.  No doubt this has been the driver for supporters of Constitutional Amendment U, which headlines itself as a constitutionally fixed limitation on all lending at 18%.  On that score it seems even harsher than IM 21's limitation of 36%, but Amendment U's 18% limit is nullified if lenders and borrowers agree to higher rates.
     First off, I don't get how any voters would want something like this in South Dakota's Constitution, which is a place where fundamental principles about governance reside.  The idea
Sort It Out, We Must
that lending rates should hold a place in a body of law that is virtually immutable seems absurd to me, considering that interest rates are best left to the laws of supply and demand, not the law of Constitutional authority.  That said, what really makes this a ludicrous proposal is that the law effectively cancels itself out by letting parties agree to any interest rate they want.  If that's the case, why set a "limit" on interest rates that can be routinely ignored?
     Backers of Constitutional Amendment U must think that voters are dumb enough to believe they're setting a limit on interest rates by passing this laughably transparent device intended to keep the payday lending industry afloat in perpetuity.  I can live with the idea of payday lending, but I'm no less disgusted by the crassness and cynicism of this measure.

1 comment:

  1. The 18% rate envisioned in Amendment U is based on a verbal or handshake agreement. Let's face it, no one is going to lend money on a handshake. So after the verbal agreement, the borrower signs the paperwork and does not realize that he has just been suckered into the average payday loan in South Dakota of 574%

    But that is not the worst part of U. If Initiated measure 21 passes and U passes, 21 is null and void, and nothing the citizens or legislatures of the future do, can set a lower rate, because that is part of Amendment U's purpose. So most of all we are depending on voters to defeat Amendment U.