Personal Loans in South Dakota: What Licensed Lenders May Charge

How the 36% cap works

The cap is a single all-in limit, the same for every loan size. Licensees may otherwise agree with you on interest and fees, but the total finance charge, including the price of add-ons sold with the loan, may not exceed an annual rate of 36%. Section 54-4-44 took effect on November 16, 2016, after voters approved Initiated Measure 21.

• Counted toward the cap: interest, origination and other fees incident to the loan, and charges for ancillary products or services.
• Not counted: late fees, returned-check fees and attorney's fees incurred after a default (section 54-4-44.3), and, on vehicle loans, items such as taxes, title fees and optional service contracts (section 54-4-44.2).
• Penalty: a loan made in violation is void and uncollectible, and the violation is a Class 1 misdemeanor.

Who needs a license and who does not

Section 54-4-52 says no person may engage in the business of lending money without a license. That business includes originating, selling, servicing or buying loans. Section 54-4-44.1 bars any device, subterfuge or pretense to get around the cap, including loans arranged by mail, telephone, internet or other electronic means, whether or not the lender has a location in the state.

• Banks and other federally insured institutions, state and national, are exempt from the license under section 54-4-37 and follow their own charters and federal law.
• Online lenders that partner with a bank may make loans through that bank. Ask who the lender of record is and whether the 36% cap applies.
• Payday and title loans from licensees are held to the same cap. Our sister site Lendmira covers them on its South Dakota lending laws page.

Other protections in chapter 54-4

When you pay a loan in full, the lender must release any lien and mark the note paid within 60 days. On short-term loans, the chapter limits renewals to four, and each renewal requires paying the outstanding fee and cutting the principal by at least 10%. Business loans of $5,000 or more to borrowers with a federal employer identification number are outside the cap, so make sure a personal loan is not written as a business loan.

Read the agreement for late fees, since they do not count toward the 36% figure. Late fees and returned payments explains what to look for.

How South Dakota compares with its neighbors

On the National Consumer Law Center's comparison of a $2,000 two-year loan, South Dakota's 36% matches North Dakota, Iowa and Montana. Minnesota caps that loan at about 33% APR, Wyoming at about 31% and Nebraska at about 30%. Your state of residence and the lender's license decide which rules apply. The state rules map shows every state side by side.

Check a lender and file a complaint

1. 1 Look up the license on NMLS Consumer Access, which the Division of Banking uses for licensing, before you apply.
2. 2 Keep the loan papers: the Truth in Lending disclosure, the agreement and any messages about fees.
3. 3 Complain to the Division of Banking through the consumer complaints page on its website, or call (605) 773-3421, if a lender charges more than 36% or lends without a license.
4. 4 Send a complaint to the CFPB as well if the lender is a bank or a bank partner. How to verify a lender lists what to check.

Questions people ask