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.