Payday loan wisconsin

Doyle kills payday loan plan

Regulations on storefront lenders not strong enough, governor says

By STEVEN WALTERS swalters@journalsentinel.com, Journal Sentinel

Friday, April 16, 2004

Madison -- Gov. Jim Doyle signed a bill on Thursday to restrict predatory lenders who gouge homeowners with exorbitant rates, but he vetoed another measure that would have imposed limits on another type of controversial loan company.

Saying a bill that restricts so-called payday lenders wasn't strong enough, Doyle vetoed the Republican-sponsored legislation. The bill would have imposed limits on the state's growing payday loan companies -- whose 337 outlets wrote $423.7 million worth of loans last year. These lenders typically charge $20 for every $100 borrowed, and state officials say fees can amount to 1,000% of the loan amount on an annual basis.

The number of payday loans has skyrocketed in the past several years. The lenders, who accept personal checks and car titles as security for short-term loans, gave 1.3 million loans in Wisconsin last year, compared with 630,000 in 1998.

While other states are tightly controlling payday loans, Wisconsin has "become a haven" for them, said Lorrie Keating Heinemann, secretary of the state Department of Financial Institutions, who had asked the Legislature for tougher controls.

"This industry has a huge economic impact on our communities, and we need to seriously address this issue," Doyle said in his veto message. "Unfortunately, this legislation doesn't go far enough."

Doyle said payday lenders earned fees of almost $85 million in Wisconsin last year. More than 90% of the fees were to out-of-state companies, he said.

Superior Mayor Dave Ross came to the Capitol to praise the veto and urge tougher controls, saying his city with a population of about 27,000 has eight payday loan outlets on two main streets. That gives Superior "an image problem," he said.

Because Minnesota has no payday loan outlets, the industry has prospered in Superior, Ross said. Payday lenders "trap" borrowers, including low-wage earners who take the money and bet it at casinos, into a "chronic cycle of borrowing," Ross said.

Peggy Partenfelder-Moede, a spokesman for Wisconsin's Deferred Deposit Association, said payday loans "filled a financial niche."

The bill, sponsored by Rep. Sue Jeskewitz (R-Menomonee Falls), would have reduced the maximum size of a payday loan from $25,000 to $5,000 and limited the number of times a loan could be refinanced with higher fees.

Jeskewitz said Doyle's veto cost the state a "great opportunity" to protect consumers.

Attorney General Peg Lautenschlager asked the governor to veto the bill, saying it amounted to "one of the weakest regulatory schemes for payday lenders in the United States."

It did not limit interest or fees that can be charged, and did not limit the number of payday loans anyone could have at one time, she said.

According to the non-profit Wisconsin Democracy Campaign, which totals campaign-finance donations, executives of check cashing businesses donated $42,500 to legislators and their party campaign funds in 2002 and 2003.

Sens. Ted Kanavas (R-Brookfield) and Russ Decker (D-Schofield) got the most, $4,800 and $3,900, respectively, the Democracy Campaign reported.

The other bill that Doyle did sign into law restricts the amount a lender can charge in interest on home loans and is intended to stop companies that prey on unsophisticated consumers.

Jim Stanek of the Metropolitan Milwaukee Fair Housing Council said "a main weakness" in the law is a requirement that victims of predatory lenders must take their cases to the state's Department of Financial Institutions if they want to complain about their loans.

Milwaukee County Treasurer Dorothy Dean, who led a public campaign to better regulate the lenders, called the measure "a good first step" and said it will stop the worst abuses.

Joe Manning and Michelle Derus of the Journal Sentinel staff contributed to this report.

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