Payday Loans and Wisconsin – A Good Compromise
Wisconsin payday loan regulators have stitched together a compromise bill that offers strong consumer protection and allows the very popular payday loan product to continue to be offered as one of many financial solutions for Wisconsin residents.
In essence, the proposed Wisconsin payday loan bill will limit payday loan consumers to a maximum $600 payday loan or 35% of a borrower’s 2-week gross income, whichever is less. This proposed $600 maximum payday loan would include any fees associated with the payday advance.
This payday loan legislation would not cap the annual interest rate that lenders can charge on payday loans. A previous bill would have limited them to 36 percent. Rep. Donna Seidel, D-Wausau, said, “The cap would have gone too far in choking off credit for borrowers struggling in the economic downturn by essentially wiping out the industry.”
Additionally, the proposed payday loan legislation allows payday loan borrowers one payday loan at a time. This would be assured by the implementation of a Wisconsin payday loan data base to be industry funded; $1 per payday loan.
Consumer protectionists applauded the proposed Wisconsin payday loan legislation because it specifically prohibits payday loan lenders from “rolling over” a payday loan consumer’s outstanding debt into a new payday loan. This addresses the so-called “cycle-of-debt” issue, a practice attacked by competitors against payday loan products. This includes banks, installment lenders and credit unions.
In 2008 Wisconsin, it’s estimated there were 530 payday loan stores that gave out 1.2 million loans totaling $723 million.