Does South Dakota cap the interest rate this contract can charge?
Not if the rate is set by a written agreement: South Dakota abolished its general usury cap for written agreements outright. SDCL 54-3-1.1: "Unless a maximum interest rate or charge is specifically established elsewhere in the code, there is no maximum interest rate or charge, or usury rate restriction between or among persons, corporations, limited liability companies, estates, fiduciaries, associations, or any other entities if they establish the interest rate or charge by written agreement. A written agreement is a document in writing, whether in physical or electronic form, in which the parties have demonstrated their agreement to the terms and conditions of an extension of credit, including the rate of interest." Only where the parties have NOT fixed a rate in writing do South Dakota's default statutory rates apply: SDCL 54-3-4 caps interest on an obligation to pay interest with no rate specified, “at a maximum rate of the Category C rate of interest as established in § 54-3-16”, which § 54-3-16(3) fixes at “twelve percent per year”, and SDCL 54-3-5 sets the default rate on money overdue on a written instrument, absent an express contract fixing a different rate, at the Category F rate, which § 54-3-16(6) fixes at “fifteen percent per year”, while § 54-3-5 adds that “[a]ny interest rate appearing on a bill, statement, or invoice may not exceed eighteen percent.”
The trap
Section 54-3-1.1's no-cap rule is conditioned entirely on there being a WRITTEN agreement fixing the rate: an oral agreement to pay interest, or silence on rate altogether, falls back to SDCL 54-3-2's presumption that a loan of money is made upon interest "unless it is otherwise expressly stipulated at the time in writing," and then to SDCL 54-3-4's or 54-3-5's capped default rates, not to an uncapped rate. The no-cap rule is also expressly subordinate to any OTHER rate cap "specifically established elsewhere in the code": a drafter should confirm no more specific statute (for a particular kind of lender or loan) sets a different ceiling before relying on § 54-3-1.1's general no-cap rule. Nothing read for this rule addresses federal preemption of any residual state usury restriction, and no South Dakota appellate opinion construing § 54-3-1.1's written-agreement no-cap rule was located in the research for this rule: an honest gap, not a resolved one.
6 authorities
- statuteSDCL § 54-3-1.1enactment date not established
The words that state the rule
Unless a maximum interest rate or charge is specifically established elsewhere in the code, there is no maximum interest rate or charge, or usury rate restriction between or among persons, corporations, limited liability companies, estates, fiduciaries, associations, or any other entities if they establish the interest rate or charge by written agreement. A written agreement is a document in writing, whether in physical or electronic form, in which the parties have demonstrated their agreement to the terms and conditions of an extension of credit, including the rate of interest. A written agreement includes the contract created by § 54-11-9 .
- statuteSDCL § 54-3-2enactment date not established
The words that state the rule
Whenever a loan of money is made it is presumed to be made upon interest, unless it is otherwise expressly stipulated at the time in writing.
- statuteSDCL § 54-3-5enactment date not established
The words that state the rule
Any interest rate appearing on a bill, statement, or invoice may not exceed eighteen percent.
- statuteSDCL § 54-3-5enactment date not established
The words that state the rule
Unless there is an express contract in writing fixing a different rate or the interest rate clearly appears on the bill, statement, or invoice, interest is payable on all moneys at the Category F rate of interest as established in § 54-3-16 after they become due on any instrument of writing, and on moneys lent, or due on any settlement of accounts, from the day on which the balance is ascertained, and on moneys received to the use of another and detained from that other.
- statuteSDCL § 54-3-4enactment date not established
The words that state the rule
Under an obligation to pay interest, no rate being specified, interest is payable from date of incurrence of debt, unless the parties have otherwise agreed, at a maximum rate of the Category C rate of interest as established in § 54-3-16 , and in the like proportion for a longer or shorter term.
- statuteSDCL § 54-3-16enactment date not established
The words that state the rule
(3) Category C rate of interest is twelve percent per year; (4) Category D rate of interest is one percent per month or fraction thereof; (5) Category E rate of interest is four percent per year; (6) Category F rate of interest is fifteen percent per year;