Bill would crack down on payday lenders

A group of Wisconsin lawmakers want to put a limit on interest rates on payday loans. Wisconsin is the only state in the country without payday loan interest rate regulation.

"We need to act on this as quickly as possible," State Rep. Tom Nelson (D-Kaukauna) said. "These operations are getting away with triple digit interest rates. They are capturing people, often those with the least, in a vicious cycle of debt," Nelson added.

The proposed Payday Lending Consumer Protection Act would cap the interest rate for consumer loans at 36% annually. Lawmakers contend those who take out a payday loan in Wisconsin are currently paying more than 500% annual interest. In some cases it's even higher than that.

At 36%, that would amount to $1.38 interest on a two-week, $100 loan. Currently, payday lenders charge about $15-20 interest on those same terms.

Some believe payday loans actually put consumers in worse financial shape. Lenders argue they provide consumers a safety net.

"It's a simple, convenient, straight forward transaction that middle income consumers turn to when they find themselves in need of short term money," Jamie Fulmer with Advance America Cash Advance said. Fulmer said a 36% interest rate cap would force the company's Wisconsin stores out of business.

"Let's make no mistake about it. This is an attempt to ban the regulated payday advance industry in Wisconsin," Fulmer said.

Not true said Rep. Nelson, but he believes the stores can lend more responsibly.

"If they can do their job without charging excessive, exorbitant interest rates then, yes absolutely, but right now they're charging 400-500% and that's wrong," Nelson said.

Lower interest rates may be around the corner but it could mean fewer payday loan options.