State Banking Division issues lending-exemption guidelines

The Legislature approved a law earlier this year regarding money lenders and nonresidential mortgage lenders. Prime sponsor was Rep. David Lust, R-Rapid City; the lead sponsor in the second chamber was Sen. Justin Cronin, R-Gettysburg. The measure’s final version won Senate approval 33-2 and got the green light from the House of Representatives 45-16 (and those sixteen are quite the mix of red R, blue D, and shades of purple).

The new law set a cap of $4 million and a limit of five or fewer nonresidential loans. Lust said a previous law passed in 2015 was too broad and covered too much. “I would argue we don’t need to regulate as far as we have,” he said. Lust added that many communities have people who are lenders of last resort and charge high interest rates. “These loans help people get financing immediately or ultimately,” he said.

“What they’re really asking is to be exempt from a tax,” argued Rep. Hugh Bartels, R-Watertown, who has been a longtime banker. He opposed the measure. Bartels told House members that bank exemptions have grown to $7 million from $5 million in recent years. Responded Rep. Mark Willadsen, R-Sioux Falls, the legislation wasn’t about payday lending. “We’re talking about economic development in our communities,” Willadsen said.

Cronin told the Senate the purpose of the bill was to allow people and institutions to invest in businesses that otherwise can’t get a loan. He said the lender is barred from debt-collection tactics, which he described as “another good move.” Exceeding the $4 million requires registering with the state and becoming subject to the state’s six percent bank-franchise tax.

“I think we’ve got a good product here,” Cronin said. Sen. Jim Stalzer, R- said the new wording changed his position to an aye from a nay.

Rep. Liz May, R-Kyle, said her family’s business received a loan “from a really good gentleman who was willing to take a risk” and now are lenders too.

State government’s Department of Labor and Regulation announced this morning the forms for qualifying for the exemption are now available. Here’s the news release.

Banking Division Issues Money and Mortgage Lender Reporting Guidance

PIERRE, S.D. – House Bill 1179 passed during the 2017 legislative session and became effective July 1, 2017. It created limited exemptions for certain money lenders and nonresidential mortgage lenders under SDCL Chapters 54-4 and 54-14.

Official guidance on House Bill 1179 and the required annual reporting forms are posted at Annual reports must be filed with the South Dakota Division of Banking by Dec. 31, 2017.

The reporting requirement included in House Bill 1179 is not intended to apply to loans made between family members. Additional questions can be directed to the Division at 605-773-3421.