The state Assembly last week made a big mistake in what was a positive step toward regulating the often predatory payday lending industry.
On Tuesday, the state Assembly approved a payday lending regulation bill by a vote of 59-38. Two key provisions in the measure would limit the amount of a payday loan to $600 and would not allow a borrower to roll a loan into a new one.
However, the Assembly voted 56-41 to kill an amendment to cap the interest rate payday lenders can charge at 36 percent.
Thirty-six percent is too high regardless, but at least it would have been a cap. A contributing factor to how borrowers are trapped by payday lenders is that they can charge borrowers such high interest rates and allow them to roll the loans and interest owed into a new loan
Prior to 1995, Wisconsin capped interest rates at 18 percent, but that was repealed to allow banks to become more competitive. Following 1995, the number of payday lenders in the state ballooned to over 500.
It was our view in August, when this bill began being discussed in the Assembly that there is no reason not to bring the cap back to that level.
Having no cap at all on these types of loans is irresponsible.
Payday loans are short-term loans made to people in advance of their next paycheck.
There are legitimate cases when a payday loan might be needed, such as an unexpected car repair or some other type of emergency expense, but the risk payday lenders pose to the public is too great to allow loose regulation.
Surprisingly the Assembly bill, which has no cap on interest rates, was called too weak by state Sen. Jim Sullivan, D-Wauwatosa, who has a plan of his own. His plan would set a loan cap at $900 and allow one loan roll-over. But, there is no mention of an interest rate cap. Sullivan acknowledged to the Associated Press last week he did not want to drive payday lenders out of business.
The Assembly and Senate must pass an identical version of the bill before the governor can sign it into law.
If payday lenders are allowed to charge whatever interest rate they feel is necessary to a borrower the impact to already financially vulnerable people could be devastating.
We call on the state Senate to revive the interest rate cap amendment rejected by the Assembly and not fall victim to payday lending industry lobbying efforts. The Senate must do what is right to protect vulnerable Wisconsin borrowers.
On Tuesday, the state Assembly approved a payday lending regulation bill by a vote of 59-38. Two key provisions in the measure would limit the amount of a payday loan to $600 and would not allow a borrower to roll a loan into a new one.
However, the Assembly voted 56-41 to kill an amendment to cap the interest rate payday lenders can charge at 36 percent.
Thirty-six percent is too high regardless, but at least it would have been a cap. A contributing factor to how borrowers are trapped by payday lenders is that they can charge borrowers such high interest rates and allow them to roll the loans and interest owed into a new loan
Prior to 1995, Wisconsin capped interest rates at 18 percent, but that was repealed to allow banks to become more competitive. Following 1995, the number of payday lenders in the state ballooned to over 500.
It was our view in August, when this bill began being discussed in the Assembly that there is no reason not to bring the cap back to that level.
Having no cap at all on these types of loans is irresponsible.
Payday loans are short-term loans made to people in advance of their next paycheck.
There are legitimate cases when a payday loan might be needed, such as an unexpected car repair or some other type of emergency expense, but the risk payday lenders pose to the public is too great to allow loose regulation.
Surprisingly the Assembly bill, which has no cap on interest rates, was called too weak by state Sen. Jim Sullivan, D-Wauwatosa, who has a plan of his own. His plan would set a loan cap at $900 and allow one loan roll-over. But, there is no mention of an interest rate cap. Sullivan acknowledged to the Associated Press last week he did not want to drive payday lenders out of business.
The Assembly and Senate must pass an identical version of the bill before the governor can sign it into law.
If payday lenders are allowed to charge whatever interest rate they feel is necessary to a borrower the impact to already financially vulnerable people could be devastating.
We call on the state Senate to revive the interest rate cap amendment rejected by the Assembly and not fall victim to payday lending industry lobbying efforts. The Senate must do what is right to protect vulnerable Wisconsin borrowers.
