Wisconsin short term lending legislation exposes loopholes

Representative Gordon Hintz, a Democrat from Oshkosh, Wisconsin, who authored a bill designed to crack down on short term lending in the state last year, is now supporting new legislation to cap interest rates at 36 percent - a provision similar to one that was dropped from last year's bill, according to the Janesville Gazette. In 2010, lawmakers passed a bill to limit the number of short-term loans carried by borrowers, and capped the value of the loans to a maximum of either $1,500 or 35 percent of gross monthly income. "Most people taking these loans live paycheck to paycheck, and then when an engine goes out or something else happens, they can’t pay it off, and things get way out of control," said Republican Representative Eric Wynn, of Whitewater, according to the newspaper. Additionally, short term lenders are required to be licensed and contribute to a database that tracks short term loan activity. Restrictions on location prevent city councils from issuing permits if a short term loan business is within 1,500 feet of another lender or within 150 feet of an area zoned for residential use. However, Wisconsin Governor Jim Doyle's use of line item veto power to eliminate vehicle title loans opened a loophole by only prohibiting licensed lenders from making that type of loan. Some lenders are exempted from being officially defined as such by the laws, which allows them to operate without holding a license or abiding by the geographical restrictions, according to the news source. This explains why MoneyMax in Janesville is allowed to conduct business directly opposite residential housing, despite the fact that a street separates them by less than 150 feet. "If they are licensed under neither (Statutes 138.09 or 138.14), then they are making loans with interest rates under 18 percent that are secured by car titles," said Michael Mach, administrator of the state’s division of banking, who was quoted by the news source. Wynn - along with Republican Senator Glenn Grothman, of West Bend - are pushing the new bill that would cap the interest rate for short term loans at 36 percent. Under the legislation, a short term loan business would not be permitted to operate until it receives a permit from the city council. In neighboring Minnesota, a Lonsdale-based debt collector recently had his license revoked by the Minnesota Department of Commerce after being found to have violated the Fair Debt Collection Practices Act by engaging in abusive conduct and harassment, according to the Northfield News.