Fighting Predatory Lending: a Glimmer of Hope in a Deep Red State

A couple years ago, two South Dakota men on opposite ends of the political spectrum got into a nasty fight over marriage equality. But after one offered the other an olive branch, they wound up forming a bipartisan alliance that won big this election year.

Their story offers important lessons for our divided country.

It all began with a Twitter feud between Steve Hildebrand, a gay former Obama campaign adviser, and Steve Hickey, a conservative pastor and former Republican state legislator. To defuse the tension, Hickey decided to invite Hildebrand out for coffee.

Eventually, the two men realized they had something in common: a deep concern about poverty and homelessness. They also agreed that the payday loan industry in their state was making these problems much worse.

Payday lenders give customers short-term cash advances, typically for two weeks, against their paycheck or Social Security check. But most borrowers can’t pay back the loan when it comes due — which is exactly what the lenders want.

According to the Consumer Financial Protection Bureau, the majority of all payday loans are renewed so many times that borrowers end up paying more in fees than they originally borrowed. In South Dakota, the average interest rate on such short-term loans is 574 percent.

In a show of bipartisan unity, Hickey and Hildebrand resolved to work together to crack down on these loan sharks. They formed a coalition, South Dakotans for Responsible Lending, to take the issue of predatory lending directly to the voters. Their goal: a 36 percent interest rate cap on short-term payday loans.

The coalition’s first step was to marshal a volunteer army of all ages, income levels, and political stripes to collect almost 20,000 signatures to get the proposal on the ballot. To build support, they held prayer vigils, gave talks at churches and Rotary and Lions clubs, and wrote letters to the editors of newspapers across the state. For Halloween, they painted pumpkins with their campaign slogans.

On November 8, despite being outspent 16 to 1 by industry opponents, the coalition won a crushing victory. More than three-quarters of South Dakota voters supported the rate cap measure.

Reflecting on their success, Pastor Hickey said, “Knowing that today in America we have reached perhaps the apex of hyper-partisanship, our efforts here of working together across the party lines is really a breath of fresh air, and we believe this is the way forward.”

Hickey also made clear that the coalition’s fight isn’t over. They’re worried the loan sharks may pursue new legal tricks to keep exploiting the poor, and they’re looking for ways to make credit more affordable for low-income South Dakotans. One option they’re looking into is using a fraction of the state’s reserves to guarantee affordable loans through credit unions.

But even though there’s more work to be done, this coalition’s bipartisan ballot box success is an inspiring example of how we can still make progress in our polarized nation.

This column is distributed by OtherWords.

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Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies.

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