Credit Slips, and NACA general counsel Ira Rheingold point out that Senator Tim Johnson of South Dakota wants to roll back the recent legislation limiting interest rates on loans to service members. This was a landmark piece of legislation, although we would rather see it applied to the entire lending industry. Who really needs more than 36% interest, anyway?
Apparently, Senator Johnson thinks that the law “may have a lot of unintended consequences that will go far beyond just the payday industry” and says that “[w]e are going to have to revisit that issue and make sure that the end result of this legislation isn’t to deny military members and their families access to banking services that they’ve always assumed would be there.” Somehow that just doesn’t square.
Here’s what we think is going on. Under federal law, the interest rates a lender may charge are governed by the laws of the state in which the lender is incorporated. Take a look at the information for your credit card when you get a chance. There is a 100% chance (well, maybe there’s a rogue, but I don’t see how they would stay in business) your credit card company is incorporated in either Delaware or South Dakota. Your payday lender? Same thing.
Wonder why that is? Guess which states have no usury law. Yup. Delaware and South Dakota.
Wait, where was Senator Johnson from again? Oh yeah, South Dakota. It all makes sense now.
Just goes to show you, it doesn’t matter who is in Congress; few politicians are on the side of consumers.
If you are in Minnesota, contact The Glover Law Firm, LLC, for a free case evaluation. In any other state, you can find a consumer rights lawyer using the National Association of Consumer Advocates lawyer database.
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