Who will win? the people or the pay-day loan special interests?

What is known in Wisconsin as the “Payday Loan” industry is being challenged by the Wisconsin Legislature. Assembly Bill 447, Substitute Amendment 1, is one of a number of proposals being offered in the Assembly and Senate to limit as well as set standards for those types of loans.

Let me say from the start, this writer has never been in support of the wide-open payday loan system that is allowed in Wisconsin. It is a system, I strongly feel, that preys on the poor, those with abnormally difficult financial problems and people with mental issues. In the past, our political parties, savings and loans, banks and credit unions and the general public have all failed to lead on this issue. Wisconsin is reported as one of the few states without serious regulation and standards for the payday loan industry.

To muddy the waters, the Assembly Speaker – who had earlier favored strong regulation for the payday loan industry and then modified his stand – was found to be dating a lobbyist for the very same payday loan industry. Added to this sad distraction is the large sum of money poured in by the payday loan industry to fight this and similar legislation. Big money is playing a role in this debate – for good reason. Madison’s Capitol Times newspaper may have reported it best when it said (posted Sunday, Feb. 14, by John Nichols) “The real issue is with Assembly Democrats, who hold the majority, and who are supposed to be more serious than the Republicans when it comes to regulating bad businesses.”

Time is running out in this legislative session. Assembly Bill 447 or other similar legislation must pass through the Assembly before moving on to the state Senate. The state Senate may present another version that, if passed, must be acted on by the Assembly. If one of the bills is not passed by both houses, the delay process that is available will likely end any chance to limit or set new standards for the payday loan industry in Wisconsin. That is what some powerful special interest groups would like.

As reported in an analysis by the Wisconsin Legislative Reference Bureau, under current law a lender other than a bank, savings and loan association, or credit union generally must obtain a license from the Division of Banking to assess a finance charge greater than 18 percent per year. This type of lender is generally referred to as a “licensed lender.” Current law also contains numerous provisions regulating consumer loans, generally loans of $25,000 or less, made to individuals for personal, family or household purposes. But little has been done to update the regulations since the payday loan industry came to Wisconsin.

The key to any payday loan legislation is to keep these loans from skyrocketing out of control to the point where the borrower cannot pay back the loan or even the interest. One only has to look at today’s housing and banking industry to understand the devastating results the loss of sensible regulation can have on the United States and the world economies. Uncontrolled payday loans have the same terrible financial effect on individuals and their families. Just because people are poor does not negate the need for sensible financial protection. Basic financial safeguards are expected when getting loans from a local savings and loan, bank or credit union. So should it be when getting a payday loan – at least basic protection should be in place.

It is important to have financial rules and protection for people applying for loans in Wisconsin. The real questions is, will the Legislature come together to have a fair payday loan bill or will the special interest money keep it from happening? Unfortunately, it seems too close to call.