MILWAUKEE — Anew study shows people in Wisconsin pay some of the highest rates in the nation for payday loans.
There are payday loan businesses all over the country. There are about 23,000 of those lenders open right now. That is almost double the amount of McDonald’s open across the nation.
One man we spoke to in Milwaukee, who only used his first name, Trey, said he prefers to use those types of businesses over banks. Although, he doesn’t get any loans from them.
“Banks, they want answers. They don’t want no answers. They give you what you ask for,” said Trey.
Another man we spoke to, who would not go on camera, says he did get a payday loan and he would never get one again, because the interest was outrageous.
Wisconsin does not cap the amount of interest a payday lender can charge.
Only these 18 states cap payday loans at an interest rate of 36 percent or lower:
Arkansas
Arizona
Colorado
Connecticut
Georgia
Hawaii
Maryland
Massachusetts
Montana
Nebraska
New Hampshire
New Jersey
New York
North Carolina
Pennsylvania
South Dakota
Vermont
West Virginia
Washington D.C.
In Wisconsin, the average person who borrows from a payday loan store usually pays hundreds of dollars in fees.
Pew Charitable Trusts found if someone borrows $500 from a payday lenders, the average cost to borrow that money is $395 in fees. That is an interest rate of 338 percent. The average credit card interest rate is 16 percent.
On top of that, one in four people usually borrows again on the same payday loan at least nine times, according to the Consumer Financial Protection Bureau.
“It’s still at such an exorbitant level that you're taking out subsequent loans and really creating this this cycle. This debt trap that people are never able to get out from underneath, and it is predatory lending, plain and simple,” said Republican State Senator Andre Jacque.
He introduceda billthis year to cap the amount of interest payday lenders could charge at 36 percent. But that bill failed to pass before the end of the session.
One of the groups advocating against caps for payday lenders is the Wisconsin Bankers Association. The association president and CEO Rose Oswald Poels says they are against any kind of interest rate cap. Even though they say they would like to see more regulation on the industry as a whole.
State Capitol, Madison, Wisconsin. (Photo by: Universal Images Group via Getty Images)
“We just don't want to limit on the interest rates on loans. I don't believe that is in anybody's best interest to arbitrarily set in interest rates on the loan,” said Poels.
Jacque says if banks and credit unions can face regulations, why can’t payday lenders?
“A lot of people that have been hurt by predatory lending, and this is, I think, an easy way to help ensure that doesn't affect more of our citizens,” said Jacque.
He plans to re-introduce legislation to regulate payday loan lenders again next year. In the meantime, he encourages people who need a quick loan to check first with a bank or a credit union and to get educated about the fees you could pay if you get a short term loan.
