Time to Halt Payday Loan Abuses

Manitowoc Herald Times Reporter
July 19, 2009

Wisconsin Assembly Majority Leader Thomas Nelson (D-Kaukauna) has teamed up with state Rep. Gordon Hintz (D-Oshkosh) to sponsor legislation meant to crack down on what Nelson calls "legalized loan sharks." Their Predatory Lending Consumer Protection Act aims to cap at 36 percent the annual interest that payday loan, check cashing, car title, or cash advance outlets may charge. That is the ceiling on loans taken out by U.S. enlisted persons, and 15 other states have adopted the 36-percent limit as well. Wisconsin, meanwhile, is the only state that does not regulate the level of interest that payday lenders can impose. As a result, APR on such loans can climb as high as 525 percent there -- yielding $124 million in interest fees collected in 2008 alone that could have been used by consumers to help shoulder the cost of mortgages, groceries, or tuition. Borrowers who cannot settle a payday loan in the typical two-week repayment period, according to Hintz, often are snared in a "debt trap." For these reasons, the editors of the Manitowoc Herald Reporter say the state Legislature must recognize the importance of backing the Nelson-Hintz bill. The business model used by payday lenders must be reformed, they insist, or more consumers will become victims.