Today, May 28, Rep. Gordon Hintz is proposing a new law to outlaw payday loans.
http://www.wispolitics.com/index.iml?Article=159936
That’s not what the law actually says, of course. It merely imposes a cap of 36 percent interest annually on such loans. Consider the effect, however.
A press release from Rep. Hintz notes that, if a consumer borrows $100 for two weeks, and pays $20 interest, he is being charged a whopping 525 percent interest. However, if the law goes into effect, the interest on that two-week, $100 loan would be $1.37.
Obviously, no one is going to make such loans. It would not be enough to cover even a fraction of the overhead of running the business.
525 percent is an enormously high interest rate. But if an adult decides that he would rather pay that interest than a $35 per check fee for overdrafting his checking account, or whatever other unpleasant alternatives he may have, the state has no right to prohibit him from doing so.
Rep. Hintz calls his bill the “Payday Lending Consumer Protection Act.” But only two groups of people will benefit should this bill pass: (1) the loansharks who will take the place of payday lenders; and (2) the vendors of the baseball bats that the loansharks will use to break the knees of debtors who can’t pay them back.
![[Print]](http://wislawjournal.com/wp-content/plugins/dmc_sociable_toolbar/print.png)
![[Email]](http://wislawjournal.com/wp-content/plugins/dmc_sociable_toolbar/email_2.png)
May 28th, 2009 at 4:01 pm
Two groups of folks borrow from payday lenders: The desperate and the ignorant. These two groups will also benefit from this legislation: The desperate will be protected from digging themselves a hole that it is impossible to climb out of. The ignorant will be protected from unwittingly committing financial suicide.
May 29th, 2009 at 10:04 am
Reputable payday lenders want customers to use payday advances wisely. The service’s goal is to be a solution for those who need low-dollar, short-term credit. A payday loan may not be the best choice in every situation. At a 36% APR, the total fee charged on a $100, two-week advance would be $1.38. Payday advance lenders could not cover the cost of originating a loan, let alone cover basic business expenses. Ultimately, a 36% APR cap would eliminate an affordable short-term credit choice for consumers. Also, compare the fees of consumers’ short-term credit options: $100 payday advance = $15 fee; overdraft protection = $29; late fee on a credit card bill = $37; $100 off-shore internet payday loan = $25 fee; bounced check and NSF/Merchant fee = $55. (Source: http://www.cfsa.net/cost_comparison.html)
May 29th, 2009 at 3:32 pm
Wisconsin