- Associated Press - Tuesday, February 16, 2016

PIERRE, S.D. (AP) - The South Dakota attorney general’s office should have to rewrite its explanation of a ballot measure that would cap the interest rates offered by payday and auto title lenders to make clear it would drive such lenders from the state, an attorney for an opponent of the measure told the state Supreme Court on Tuesday.

The justices heard oral arguments in the appeal of a circuit judge’s ruling last year that upheld Attorney General Marty Jackley’s written explanation for the initiative, which would cap interest rates for such short-term loans at 36 percent annually.

Supporters say the proposal is aimed at protecting consumers from predatory lenders whose high-rate loans can trap people in debt.

Jackley has said he has provided the public with a fair and accurate explanation of the proposal.

But attorneys for Erin Ageton, an opponent of the initiative and an employee of a car title lender, argue that the explanation doesn’t correctly state the effect and purpose of the measure.

They contend that the explanation should include language informing voters that the proposal would put the industry out of business in South Dakota because the cap would prevent lenders from covering the costs of making the loans.

“The measure bans short-term lending,” said Alan Simpson, an attorney for Ageton. “The 36 percent number is just something grasped out of thin air.”

The Consumer Financial Protection Bureau’s website says a typical two-week payday loan can have fees that equate to an annual interest rate of almost 400 percent.

It’s not clear when the Supreme Court will issue an opinion. The legal proceeding is just one part of the complicated campaign over short-term lending in South Dakota ahead of the 2016 election.

An attorney for Ageton has said that she is an employee of Georgia-based Select Management Resources. The company gave about $1.7 million in 2015 to a South Dakota group pursuing a ballot measure that opponents say is an industry-backed attempt to insert a loophole allowing unlimited interest rates into the state constitution.

The company has auto title lending locations in South Dakota under the name North American Title Loans.

Select Management Resources was the sole financier in 2015 of South Dakotans for Fair Lending, a political committee pushing for the amendment to cap interest rates in South Dakota at 18 percent annually but allow higher ones if the borrower agrees to them.

The 18 percent amendment was put forward after the 36 percent measure, which is backed by a group fighting against payday lending called South Dakotans for Responsible Lending.

Both the 36-percent rate cap and the industry-backed amendment are proposed to go before voters in the 2016 election.

But opponents of both initiatives are also challenging signatures turned in to the secretary of state’s office to get them on the ballot.

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Follow James Nord on Twitter at https://twitter.com/Jvnord

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