What is really in the payday loan bill?

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Democrats in the State Assembly just passed a bill that, with the signature of the governor, will finally drive capitalism out of the state of Wisconsin.  At least that’s how the Republicans and payday lenders want you to see it.

Here’s what it really consists of:

  • A requirement that payday lenders inform clients of the total cost of the loan, including fees and the annual percentage rate (APR).
  • A requirement that lenders give clients a brochure (written and provided by the Department of Banking) with basic information on payday loans and the consequences that result from a default.
  • A requirement that lenders inform customers that they have the right to rescind the loan by the end of the next business day.
  • Loans can no longer accrue interest after the loan maturity date.
  • Lenders cannot accept collateral that exceeds the principal of the loan plus the finance fee.

In some ways, it is a radical piece of legislation. Imposing any kind of regulation on an industry which has never faced any regulation in the past is rather significant. But these regulations are so intuitive that their passage signifies nothing more than the Democrats’ realization that the story about their leader’s relationship with a payday loan lobbyist had to be killed before average voters started to connect the dots.

Once upon a time, Mike Sheridan supported a 36 percent interest rate cap on payday loans. Then he decided it was a silly idea. Then he blamed payday loan lobbyists for rumors that his caucus was going to oust him. Then he announced he was dating a payday loan lobbyist.

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9 Responses to “What is really in the payday loan bill?”

  1. Emily Says:

    Honestly, I think Sheridan’s affair may have been the best thing to happen to pending payday loan legislation. It certainly appeared to successfully kick start the move to get it passed.😛

  2. Irish Frog Says:

    I’ve never understood the Sheridan/Lobbyist issue. I mean, I’m pissed about it, but why did those opposed to the bill (Republicans) care? They ought to have been happy that the leader of the Dems was sleeping with the lobbyist for a group they support. I don’t see how any hay can be made by the right, if anything it’s good for the left as it ensures the bill will have to be passed and will be front page news when it passes.

    We’ll see what this thing looks like when it gets to Doyle. The Senate is adding in an interest rate cap, something Sheridan didn’t support. But how could he fight against it in this climate?

    • Jack Says:

      I highly doubt any interest rate cap will make it to Doyle’s desk. The assembly rejected a rate cap amendment. The senate would have to have a pretty high rate cap, I assume.

      • Irish Frog Says:

        “high rate cap” is sort of relative when talking about the payday loan industry, isn’t it? Last I heard the Senate was toying with a 36-38% rate cap.

  3. jkursman Says:

    Why are we asking our legislators to dictate what financial products are available to educated Wisconsin consumers?

    Are other organizations offering to make short-term loans to those who need them to cover unexpected auto, medical, dental, vet, funeral, child care, etc. expenses?

    Are organizations advocating for rate caps returning charitable contributions from banks and credit unions who charge higher fees for smaller, shorter-term loans disguised as “overdraft protection”?

    Why are the claims of the “Center for Responsible Lending” a self-identified marketing arm of Self-Help Credit Unions which stands to benefit financially from a lack of competition, partners with Freddie and Fannie, funded by leading players in the mortgage and credit crisis (ie; Herb and Marion Sandler) trusted to validate the need for payday reform?

    Listen to voices of customers, not self-proclaimed advocates and decide for yourself!

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