South Dakota law caps the annual interest rate on payday loans, car title loans, and most consumer installment loans at 36% APR, including all fees and charges. This hard cap is set out in South Dakota Codified Laws Section 54-4-44, which was added when voters approved Initiated Measure 21 by a roughly 76% margin in November 2016. There is no separate, higher rate schedule for short-term "payday" loans the way many states allow. Because a traditional two-week payday loan only turns a profit at triple-digit APRs (often 300% to 600%), the 36% ceiling made the storefront payday model uneconomical, and the payday and title-loan industry effectively shut down in South Dakota. So while payday loans are not technically "banned" by name, the rate cap accomplishes the same result: licensed payday lenders no longer operate in the state.
Is Payday Lending Legal in South Dakota?
Payday lending is legal only in the sense that no statute prohibits a lender from making a small short-term loan. What South Dakota prohibits is charging more than 36% APR for it. Section 54-4-44 states that a lender may not charge an annual rate exceeding 36% on a loan of money, credit, goods, or services. The same section makes clear the cap cannot be evaded by any device, subterfuge, or pretense, such as recharacterizing interest as fees, memberships, or "credit services" charges.
Before Initiated Measure 21, South Dakota was one of the most permissive states in the country. The state had effectively no usury ceiling for licensed lenders, and payday and title lenders routinely charged annual rates well above 500%. The 2016 ballot measure replaced that open environment with one of the strictest caps in the nation. A competing, industry-backed measure on the same ballot (which would have allowed an 18% cap that borrowers could "agree" to waive) was rejected by voters, so the 36% figure stands without a loophole.
The 36% APR Cap: How It Works
The defining feature of South Dakota's rule is that 36% is an all-in ceiling. When you calculate whether a loan is legal, you do not look at the stated interest rate alone. You include origination fees, service fees, renewal or rollover charges, and any other amount the borrower must pay to get or keep the loan. If the total cost of credit, expressed as an annual percentage rate, exceeds 36%, the loan violates Section 54-4-44.
This matters because predatory lenders historically disguised their true rate by labeling charges as something other than interest. South Dakota's statute closes that door: the cap applies regardless of what the charge is called. The practical effect is straightforward. On a $300 loan, a 36% APR amounts to only a few dollars of interest for a two-week term, which is far too little to support the storefront payday business model. That is why, rather than lend at 36%, the payday and title-loan outlets closed or converted to other products.
Maximum Loan Amount and Term
Because South Dakota regulates payday-style lending through a rate cap rather than a dedicated payday-loan statute, it does not set a special maximum loan amount or a maximum term the way states with active payday industries do. There is no statutory "$500 maximum" or "31-day maximum" carve-out for payday loans, because there is no licensed payday product operating under such terms. Any consumer loan, large or small, short or long, is subject to the same 36% ceiling. This is a key difference from states that permit payday loans but limit them (for example, capping a single advance at a few hundred dollars and a term of two to four weeks).
Rollover and Renewal Limits
States that allow payday lending typically fight the "debt trap" by limiting rollovers, requiring cooling-off periods, or mandating extended repayment plans. South Dakota does not need those rules in the same way, because the 36% cap removes the high-cost rollover economics entirely. A renewal or rollover fee counts toward the APR calculation, so a lender cannot stack fee after fee to keep a borrower in perpetual short-term debt without breaching the cap. In effect, the rate ceiling is the rollover protection.
How the Federal Baseline Compares
South Dakota's 36% cap mirrors the federal Military Lending Act, which caps the "military annual percentage rate" at 36% for active-duty servicemembers and their dependents nationwide. South Dakota simply extends that level of protection to every resident, not just military families. There is no general federal usury cap on consumer loans, so most rate limits come from state law, which is why these rules vary so dramatically from one state to the next.