A new effort to crack down on the payday loan industry in Wisconsin. State Representative Gordon Hintz would set a 36 percent cap on annual interest rates for payday loans in Wisconsin.
"Wisconsin's a gold mine (for payday lenders)," says Hintz, a Democrat from Oshkosh. "We're totally unregulated." Jackie Austin with Madison Area Urban Ministry says even at the 36 percent rate in the proposed legislation, she couldn't recommend a payday loan to her clients, although she stops short of saying there's no place for the payday loan industry. "We are not saying there should be no such loans ever, because there are unusual circumstances, and extreme circumstances, that may arise," says Austin.
But, George Klaetsch with the Wisconsin Coalition for Consumer Choice, says payday lenders have essentially been driven out of states which have adopted regulations similar to what's being proposed here. "What the consumers are saying within this debate is, do not eliminate my choice," says Klaetsch, adding that people deprived of access to payday loans may turn to bouncing checks or selling plasma to make ends meet.
Advocates of the bill say Wisconsin is the only state that doesn't regulate the payday loan industry, and that payday loan clients often become trapped in a cycle of debt, with interest rates far above what banks and credit unions charge.