South Dakotans for Responsible Lending is proposing a ballot measure that would impose a cap on interest rates charged by the lenders.

But Erin Ageton, the vice president of operations for title loan company Select Management Resources, is asking a circuit court judge to force South Dakota Attorney General Marty Jackley to rewrite the ballot language. Ageton argues in a new lawsuit that if the measure passes, it will cause her employer to close stores in the state.

It's a common refrain played out across the nation. Supporters of such interest rate caps argue they're needed to help people escape predatory lending practices that can trap people in a cycle of high-interest debt. Opponents typically counter that such caps would wipe out an entire industry and cut off the only access to credit that some people can obtain.

Ageton claims the ballot statement misleads the public into believing that short-term lending could continue in South Dakota if the rate is capped.

"The measure's purpose, effect and legal consequence is to set a 'maximum' interest rate so low that this form of consumer credit will simply disappear. I am an opponent of the initiated measure to set a maximum finance charge for certain lenders because I believe it will limit South Dakotans' access to affordable credit by capping interest rates and charges for certain lenders at such a low rate that they will be unable to cover the cost of extending loans to customers who need them most," Ageton wrote in an affidavit.

Reynold Nesiba, treasurer for South Dakotans for Responsible Lending, wasn't surprised that the payday lending industry is resorting to legal actions to try to stop the measure, he said. It's a strategy the industry has used in other states with similar ballot measures.

South Dakotans for Responsible Lending must collect 13,871 signatures of registered voters by November 2016 to qualify for the ballot.

Jackley's description of the measure fails to inform voters that the payday lending industry would collapse if the 36% limit is adopted by voters, according to Ageton’s complaint. It notes that a 36% limit wouldn't be enough to cover the expenses related to issuing loans.

"The statement's failure to mention the elimination of the short-term lending market – let alone 'educate' voters on this purpose, effect, and legal consequence, is not a trivial omission or harmless error," the complaint says. "If enacted, this measure will have significant impact on South Dakotans who rely on short-term lending to obtain credit. For many consumers of short-term loans, alternative sources of credit are not available."

Jackley defended the language in a statement to South Dakota's Argus Leader.

"Pursuant to South Dakota law, I have worked to provide a fair, clear, and simple summary of the proposed measure in order to assist our voters," he said. "I respect that South Dakota law provides this opportunity for the parties involved to ask the Court to address any concerns they may have with the explanation.”

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