A couple years ago, Assembly Speaker Mike Sheridan thought a 36-percent interest cap on payday lenders was a good idea. He co-sponsored a bill that would do it. Now - not so much. He now thinks the bill “goes too far”.
Payday loans can cost you 500 percent - even more - in annual interest, if you keep rolling them over because you can’t make the bi-weekly payments.
So what’s “fair”, Mike - 33 percent? 29 percent? What would YOU pay?
In the past year, owners of payday loan companies have cranked up the pressure on the politicians. They’ve paid for thirty hired guns (lobbyists) and dumped no less than 140 grand into the campaign coffers of politicians who are suddenly “on the fence” about regulating payday loans. See any connection here?
Did I mention that Wisconsin is the only state in the union that does NOT regulate payday loans?
As with any story, there are two sides. The payday loan folks say a 36-percent cap would put them out of business. I would imagine such enterprises have a fairly high rate of customer loan default. Then again, if you’re gonna get a 500 percent return, you gotta have a substantial amount of risk.
The lenders say they didn’t create the problem of poverty, that it was there long before they opened their strip-mall outlets, and capping their loan rates won’t make poverty go away.
Sheridan has now done a nearly complete about-face on the issue, recently telling the cable TV political channel Wisconsin Eye “there’s a lot of jobs that are impacted if you just eliminate the industry”. There are 542 payday lenders in Wisconsin, who wrote $723 million dollars worth of loans last year. Lots of lenders, lots of money.
What’s the rate? Twenty bucks per hundred borrowed, due in two weeks. That’s 520% annual interest. Most banks will gig you 30 dollars or more if you bounce a check, even if it’s for only ten bucks. My TI Business Analyst calculator freezes up when I try to calculate APR on THAT.
There are some other proposals floating around, up there under the Big Top. One would ban car-title loans, one would limit fees for late payments, one would put restrictions on rolling over the two-week payday loans. And one would create a database to ensure people don’t borrow money from one payday lender, to pay off another.
Sort of like the credit-card shuffle that got so many folks into trouble when the economy crashed. Now, since you can’t get a credit card that easily, apparently a lot of folks get payday loans instead.
And with the best lobbyists money can buy prowling the capitol on behalf of the payday lenders, and dollars flying freely into the campaign warchests of the politicians, things aren’t likely to change.
There are plenty of crooks on both sides of this issue.