Wisconsin is the only state in the union that doesn’t regulate payday loans. And the leaders of that industry want to keep it that way. At least that’s how it seems after the payday lending industry donated nearly $75,000 to Wisconsin politicians last year, the same year in which these legislators debated whether they should pass a bill regulating the way payday lenders operate. A story in the Milwaukee Journal Sentinel reported that this figure represents an all-time record for a non-election year.
Wisconsin Stands Alone
Did the donations from the payday loan industry influence state legislators? That’s always difficult to prove. But the fact is, Wisconsin still stands alone as the one state that does not regulate payday loans in any way. This may be changing, though. In February, Wisconsin’s House of Representatives passed a bill that would restrict payday loans to a maximum amount of $600 or 35 percent of a borrower’s bi-weekly income, whichever figure is less. The House bill, if eventually passed, would also prohibit vehicle title loans and forbid people from rolling over a loan from one paycheck to the next. This bill, though, is just a first step. Members of the Senate in April are scheduled to consider payday loan regulations, too. According to the Milwaukee paper, it’s not clear if both the House and Senate members will reach an agreement on a bill to forward to the governor.
The bill that the House passed has earned criticism from both opponents and proponents of regulating payday loans. Critics of the industry say that the Wisconsin measure will mean little if it doesn’t cap interest rates, which can go as high as 500 percent over the course of a year, on payday loans at 36 percent. Supporters of the industry say that the bill goes too far, and would make it impossible for payday lenders to survive financially.
Surviving in Other States
Of course, this argument ignores the fact that payday lenders are still thriving even in states that have regulations that are more restrictive than the ones Wisconsin legislators are debating. The fact is, there will always be a market for payday loans, no matter how severely they are regulated. That is especially true now, as the economy continues to limp along. Payday loans act as a financial safety net for individuals who are struggling to pay their basic bills and afford their necessary living expenses. In today’s economy, with unemployment continuing to rise, the demand for payday loans is even higher. It’s important for legislators to regulate the way these lenders do business, so that they don’t take advantage of desperate borrowers. But it’s also important for these lawmakers to realize that there is a reason payday lenders are doing such big business today.