Payday lending bill smells real fishy…

If you followed my old blog, you know that I don’t think much of the “keeping poor people poor” payday lending industry in Wisconsin.  I think it needs some serious controls placed on it. It’s predatory lending, pure and simple — and I’m sick of people defending its exploitive practices by acting like the free market is going to take care of it.  It hasn’t and it won’t, because the business relies on a market comprising people with few options or who lack sufficient sophistication in financial matters to adequately protect themselves.  

In short, there ought to be a law and it has to include some interest rate limits.  Not having limits would be like claiming to reform drunk driving laws without having a specificied unlawful blood alcohol limit in the statute. The sad truth is that if the Wisconsin legislature set an Annual Percentage Rate cap of 100 percent interest on payday loans, they would still be performing a significant service.  Think about that.

The Democrats should be able to rally the votes to get this done and signed and time is running out in this term of the legislature.  If they don’t, then it’s a wasted opportunity to do some good and we don’t know if there will be sufficient support in the term that begins in 2011.

Playing in the background of this discussion is a highly compromising situation with Assembly Speaker Mike Sheridan and you can read about that here:

http://www.jsonline.com/news/statepolitics/85821702.html 

This is starting to remind me of the bad old days with former Senate Majority Leader Chuck Chvala and it should give everyone cause for pause. In ethics laws, we talk about both conflicts of interests and the appearance of conflicts of interests.  If it walks like a duck…

JR

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2 Responses to “Payday lending bill smells real fishy…”

  1. Though we live in hard times and I myself had seen my own income drop from approximately $30,000 per year to just over $20,000, in no way would I ever seek help from a pay day loan outfit any more than drawing cash off of a credit card. There is another name for those places. They are called loan sharks, and that is a real way to make a bad situation worse.

  2. There was a time when I was working on commission that payday lenders made sense.

    I could “float” a check using my banks overdraft projection service they offer, I could just pay the bills late and suffer the late fees, or I could borrow what I needed for a week or two and pay it back when the commission check came. The cost of the fees made the payday lender the cheapest way to go.

    The biggest abuse of the system is the rolling over of the loans and people borrowing more than they can reasonably ever pay back, and the proposal gets at those two most common problems.

    If we are going to look at the interest rates though, to be fair… any law would have to look at “fees” in addition to interest and any regulation of payday lenders would also need to regulate banks and their overdraft protection services they offer.

    I know with my bank, if you are not financially savy and get your bank balance from the ATM machine, the available balance INCLUDES this overdraft protection so those without good financial litteracy will be more likely to fall victim to the bank fees thinking that money is already theirs.

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