Posts Tagged ‘payday loans’

What is really in the payday loan bill?

February 17, 2010

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.

Will auto titles be a part of payday loan reform?

February 4, 2010

I was looking over financial legislation in the Assembly and came across this bill authored by Rep. Josh Zepnick (D – Milwaukee), which would ban the use of auto titles as collateral by payday lenders.

This bill prohibits a licensed lender from making or offering a motor vehicle title loan.  The bill defines “motor vehicle title loan” as a loan of $25,000 or less to a borrower that is, or is to be, secured by a nonpurchase money security interest in the borrower’s motor vehicle and that has an original term of not more than three months.

As I’m sure many of you have noticed, “auto titles” are one of the chief marketing tools used by payday lenders.

State bar favors payday regulation

October 13, 2009

This should be an interesting political debate. My bet would be on a compromise. Nevertheless, there are strong voices in favor of the bill to cap interest rates at 36 percent:

The State Bar of Wisconsin’s Public Interest Law Section told a jointlegislative hearing Wednesday it favors legislation to cap interest rates charged by payday loan operations.

“Wisconsin is the only state which has no regulation of payday lenders,” Fons told the committees. “Allowing 500 percent to 1000 percent annual percentage rate short-term loans causes far more financial distress than it cures.”

Payday loans

August 12, 2009

“They were kicked out of North Carolina, are constitutionally banned in Arkansas and heavily regulated in Minnesota. The Bush-era Department of Defense found that they are a threat to members of the military.”

What would Bob La Follette have thought of Wisconsin struggling to keep up with Arkansas?