Senate and Assembly Pass Payday Lending Reform

Posted by Amy on Tuesday, 27 April 2010

In the final week of the legislative session, the Wisconsin State Senate and State Assembly took an important first step toward regulating the payday and auto title loan industry. The final bill (SB 530) did not include a rate cap as many had advocated, but instead the chambers passed legislation designed to restrict and prevent the most abusive practices of the payday and auto title lending business in Wisconsin.

The practice of short term, high interest lending has become a booming business in Wisconsin. Without any regulations in place, payday and auto title lenders have been able to offer loans at 500% APR to consumers badly in need have cash to pay for emergencies. Instead of helping individuals and families in a bind, payday lenders trap consumers into a never ending debt cycle robbing our neighbors of their daily bread.

The final bill (SB 530) to regulate payday and auto title lending includes the following provisions:

Borrowers will be restricted to one loan at a time, and will be limited to borrowing the lesser of $1,500 or 35 percent of gross monthly income, including all fees and interest. The loan could be rolled over only once, and if a borrower is unable to repay the loan, the lender would be required to offer the borrower the option to repay the loan over four pay cycles at a reasonable interest rate.

Auto title loans will be restricted to half of the vehicle's value, and requires lenders to give notice before seizing a vehicle if a borrower defaults on the loan. If the vehicle is sold, lenders are required to give the borrowers cash back if the car was sold for more than the amount of the loan.

Many states have adopted initial attempts at regulating payday lenders, including interest rate caps, only to have the industry redefine itself and operate as business as usual. Time will tell if the package of reforms as adopted by the Wisconsin State Legislature will be meaningful and effective. However, we recognize the work of legislators this session to steer payday lending reform beyond committee hurdles that have stopped all previous attempts toward final passage.

LOPPW advocates were heavily engaged in the payday lending debate, and voiced their views on other important issues as well. Whether or not you agree with the actions taken by our elected leaders on payday lending or other bills please continue to pray for our government officials that they may work for peace and justice in our state.