Released: June 24, 2009

Coalition urges state lawmakers to pass the Predatory Lending Consumer Protection Act

Contact: Sol Carbonell, 608-217-7386

Today, Wisconsinites For Responsible Lending (WRL), a coalition of groups and individuals from across the state, is urging state lawmakers to pass the Predatory Lending Consumer Protection Act and put a stop to the abusive and predatory practices from the payday lending industry.

“Wisconsin is the only state in the country with no interest rate caps. Our families are subject to the most abusive and predatory fees and interest rates. From Green Bay to Janesville, Eau Claire to Milwaukee, Wisconsinites are paying millions of dollars in excessive fees. The current economic crisis makes reforming this industry a priority,” said Sol Carbonell, Associate, National Priorities for Consumer Action and WRL founder. “It’s time to put politics aside and protect hard-working families. It’s time to pass the Predatory Lending Consumer Protection Act. We urge Speaker Sheridan to refer this bill to the Consumer Protection Committee in the Assembly and all members of our State Legislature to take swift action.”

• Predatory payday lending is having devastating effects on our communities. It strips consumers of their income and traps them in a never-ending cycle of high-cost debt. Payday lenders profit from repeat borrowers, charging abusive fees and interest rates that surpass 500%. Consumers struggle to pay the loan back, fall behind on basic expenses and often seek taxpayer help from social service organizations and publicly-funded government programs that provide food and assistance to cover rent and utilities.
• Fifteen states and the District of Columbia either prohibit payday lending completely or have established two-digit limits on interest rates.
• The Pentagon declared that high payday loan fees threaten the security and stability of military families, prompting Congress to pass a national 36% interest rate cap on payday loans for active duty members of the military.

The Predatory Lending Consumer Protection Act, introduced by Representative Hintz and Senator Hansen, would establish a comprehensive 36% rate cap for loans of $5000 or less.

“A 36% rate cap costs nothing to taxpayers. It is the only measure that will protect families from abusive and predatory payday loan interest rates. Wisconsin policy makers have an opportunity to enact proven legislation that would bring immediate benefits to our struggling families. We urge legislators not to give in to the industry’s pressure and do what’s right for workers, minorities, immigrants, seniors, single-mothers, and all Wisconsin residents,” said Carbonell.

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Payday Lending in Wisconsin

According to the Department of Financial Institutions, the average interest rate on a two-week payday loan in Wisconsin is 542%. “That clearly shows we’re a little behind the consumer protection curve,” said John Keckhaver, WRL member.

“Payday lending was practically nonexistent in Wisconsin until just a few years ago, which is something to keep in mind when people ask, ‘What would we do without it?’ The growth of the industry has been dramatic, from two payday lenders in 1995, to 346 in 2004, to 530 in 2008,” explained Keckhaver.

Where does all that money go?

“The impact on the pocketbooks of hardworking Wisconsin families is significant. Wisconsin residents paid an estimated $124 million in payday lending fees in 2004. Where does all that money go? It goes to companies that are based outside the state. So much for the payday lending industry’s economic development arguments.

A not so “needed service”?

What about the industry’s claim, that despite high fees, they’re providing a needed service? Research out of the Center for Community Capital in North Carolina shows that people typically turn to a number of alternatives when payday lending storefronts aren’t around. They pay a bill or expense late, use money from a savings account, obtain money from friends or family, use a credit card or cash advance, take out a bank loan or line of credit, or bounce a check or use overdraft. These alternatives are much better for the economic security of our residents than getting into a cycle of growing debt,” said Keckhaver.

Financial Stability Coordinator Gina Sanchez from La Casa de Esperanza in Waukesha is too familiar with the impact of payday lending. “Payday lending undermines our efforts to assist our clients achieve financial independence.”

Take the case of Patricia, a retired nursing home aid, who needed extra money to pay for moving expenses. She took out three loans amounting to $550 and ended up paying $2,223 in interest -- without a penny of it going to pay off principal.

Or Jennifer, a single mother who needed $400 dollars to pay some bills. She was charged 1,147.14% Annual Percent Rate (APR).

It’s not uncommon to hear people find themselves trapped in a cycle of debt they just can’t get out of and end up filing for bankruptcy. That was the case of a couple that was putting $1,500 a month to cover just the interest on four payday loans, while unable to make payments on their mortgage, explained Sanchez.

What our members are saying

"Payday lenders target minorities and economically-disadvantaged communities, especially Latinos and African Americans. Nobody, particularly people who are experiencing financial hardships, should be subjected to the extremely high interest rates that payday lenders charge. Our communities simply do not need to be further impoverished by the predatory 'services' of payday lenders. If a 36% rate cap is good for the military, it should be good for everyone else." Peter Muñoz, Centro Hispano of Dane County.

"Predatory lending practices have had a detrimental impact on so many of Wisconsin's consumers; we believe the time is ripe to tighten and improve on current regulations for this issue.” Kristi Luzar, Urban Economic Development Association of WI (UEDA).

“Predatory payday lending is an irresponsible and abusive business that we have been dealing with for too long. Families that can’t make ends meet are stressed enough over this fact – why should they be overcharged for trying to put food on the table? As leaders in the community, it’s time for us to link arms and push a little harder to protect our families and their financial well-being.” Stacy Zielinski, Wisconsin Women’s Business Initiative Corporation and Wisconsin SAVE$.

"AARP Wisconsin urges our legislators to pass the Predatory Lending Consumer Protection Act. Abusive payday lenders are eroding the income and savings of Wisconsin's families and communities. The abusive and predatory payday loans charge exorbitant interest rates that sometimes top 500%. AARP Wisconsin supports the 36% rate cap and the tightening of regulations which guide the industry." D'Anna Bowman, AARP Wisconsin.

Wisconsinites for Responsible Lending Members

AARP of Wisconsin - Center for Family Policy and Practice - Centro Hispano of Dane County - Citizen Action of Wisconsin - Coalition of Wisconsin Aging Groups - Comité Festival Mexicano (COFEMEX) - Common Wealth Development - Communities United - Community Action Coalition for South Central Wisconsin, Inc. - Community Action Inc. of Rock and Walworth Counties - Cooperative Network - Dane County Housing Authority – IndependenceFirst - Interfaith Coalition for Worker - Justice of South Central Wisconsin - La Casa de Esperanza - Latino Service Provider Coalition - Latinos United for Change and Advancement (LUCHA) - League of Women Voters of Wisconsin - Education Fund - Legal Aid Society of Milwaukee - Madison Area Urban Ministry - Make A Difference - Wisconsin, Inc. - Metropolitan Milwaukee Fair Housing Council - Milwaukee Jewish Council for Community Relations - Movin’ Out, Inc. - National Association of Social Workers, Wisconsin Chapter - United Community Center (UCC) - United Migrant Opportunity Services (UMOS) - Urban League of Greater Madison - Urban Economic Development Association of WI (UEDA) – Voces de la Frontera - Wisconsin Alliance for Retired Americans - Wisconsin Community Action Program Association (WISCAP) - Wisconsin Consumers’ League - Wisconsin Council on Children & Families - Wisconsin Housing and Economic Development Authority (WHEDA) - Wisconsin Saves - Wisconsin Women Business Initiative Corporation – WISPIRG - Worker Rights Center - YWCA of Madison - YWCA of Rock County.