MADISON, WI (Wisconsin Radio Network) – Faith groups and low-income advocates are shining light on the payday loan industry in Wisconsin and elsewhere.
In advance of the federal Consumer Financial Protection Bureau’s expected presentation of a new administrative rule that could rein in high-interest lenders and encourage more responsible lending practices, the Wisconsin Public Interest Research Group Foundation has released a new fact sheet on the impact of predatory high-interest loans on Wisconsinites.
During a media conference call on Tuesday, Peter Skopec with the WISPERG Foundation calls them “debt traps by design.”
The average payday loan in Wisconsin is $320 and carries an APR of 589 percent. The same loan would carry finance charges of more than $866.
State Representative Gordon Hintz (D-Oshkosh) said that while greater transparency and consumer education are needed, “a lot times people are taking outs loans because they have bad credit. They have to get by. They have to pay rent, they have to put food on the table.”
Hintz said keeping pace with the industry through legislation is often a challenge.
“In fact, very few companies do what are defined as payday loans in Wisconsin. Like they’ve done in other states, they’ve morphed into different products.”
According to the WISPIRG Foundation fact sheet, “high-interest lenders’ business model relies on borrowers’ inability to repay an initial small-dollar loan and then trapping consumers in a spiral of growing debt, piled-on fees and skyrocketing interest rates.
These loans are routinely targeted at low-income Wisconsinites and at people of color, with devastating impacts for already vulnerable communities.”
Pastor Marian Boyle with Green Bay’s West Side Moravian Church said she knows people impacted by the “predatory” loans. “Friends, family and members of my congregation who turn to these out of desperation. It’s a short term fix that creates a bigger problem long-term.”
