If payday lenders are unscrupulous we all pay. That’s the message from a lawmaker that wants to cap interest rates for payday loans at 36-percent annually. State Representative Gordon Hintz’s (D-Oshkosh) held an informational hearing on the bill Wednesday. He says those who are patronizing these lenders don’t have much disposable income. He says rather than clients paying the high interest rates they could be paying for food, clothing and other items that contribute to the economy. The Oshkosh Democrat says when the debtor can no longer afford to pay their necessary bills, county emergency fund money is sometimes used, meaning taxpayers are picking up the tab.
Michael Trepanier, Executive Assistant at the Wisconsin Department of Veterans Affairs, believes protections enjoyed by the military should extends to all Wisconsinites.. In 2006 Congress set the Military Annual Percentage rate, a 36-percent rate cap, for active duty members. However he adds veterans do not enjoy those consumer rate protections.
Jennifer Johnson, Senior Legislative Counsel with the Center for Responsible Lending, testified that payday loan businesses have mechanisms that can snare clients into debt including spiking interest rates and direct access clients’ bank accounts. She equated payday loans to “a defective product.” The so-called predatory lending can charge interest rates as high as 500-percent.
The payday loan industry has said they offer a service for people who need cash in an emergency, and want to avoid writing a bad check. Jamie Fulmer with Advance America, a payday lending company, says the rate cap proposal would make it impossible for them to stay open. He says it would only allow them to charge about $1.38 for every $100 borrowed on a two week loan. Currently, he says most lenders charge about $20 for that service, which helps them cover their overhead and remain profitable.
