A bill winding through Wisconsin’s legislature would tighten regulations on the fast-growing payday loan industry, which provides small, short-term loans.
Sponsored by Rep. Gordon Hintz, D-Oshkosh, the proposal would cap interest rates on borrowers at 36 percent a year, whereas current interest rates can easily surpass 100 percent annually. Currently, there is no interest rate cap on the industry.
Legislation aimed at payday lenders varies widely across the United States. But Wisconsin is the only state that has not yet targeted the industry with legislation.
“The challenge has been issued to the Legislature about whether we're going to pass some meaningful legislation to protect consumers or not," said Hintz, according to a report in the Wisconsin State Journal. "We've ignored this for long enough.”
Payday lenders have seen their industry flourish in the last decade—there has been a 391 percent growth during that span, according to the Journal—with revenues reaching $723 million last year.
Hintz’ bill, payday lenders say, would leave no room for profits and put them out of business in Wisconsin. And that will strain an immense community of borrowers, comprised mostly of the working poor, in need of easy, short-term loans.
"It would eliminate the industry not regulate the industry," said Erin Krueger, a lobbyist for the payday loan industry, referring to the Hintz bill, according to the Journal.
Proponents of the bill say they want to rid the state of predatory lending practices in which borrowers become burdened by paying escalating interest on their loan without ever paying the principal of the loan.