The Wisconsin Catholic Conference has come out in support of legislation imposing reasonable limits on interest rates charged by payday loan stores, which under current law enjoy no limits on the interest rates they can impose:

Arguing “needy families in Wisconsin should not be abandoned to predatory practices most of us would find intolerable,” the Wisconsin Catholic Conference (WCC) is supporting legislative efforts to place stronger regulations on the payday loan industry.

The WCC is asking Catholics and others to support legislation such as Assembly Bill 392, which was introduced last week by over 55 co-sponsors. The proposal prohibits payday lenders from assessing finance charges that exceed 36 percent per year, and would give the Department of Financial Institutions (DFI) the authority to enforce the new regulations. Those who violate the regulations could be subject to fines, imprisonment, or both. Borrowers could also bring suit against violators to recover damages.

WCC Executive Director John Huebscher said that the Conference’s support of efforts to curb payday lending reflects the insights of Catholic groups that work directly with needy families. Catholic Charities agencies in Wisconsin, which offer family financial counseling services, are seeing an alarming rise in the number of individuals seeking their services due to the unregulated nature of the payday loan industry.

“The everyday experience of staff at Catholic Charities and that of parish-based volunteers with the Society of St. Vincent de Paul Councils offer powerful testimony that payday loans impose great hardship on families who already struggle financially,” Huebscher explained. “Their message is loud and clear. Our laws must do more to protect the poor in this area.”

I’ve read the arguments by those who support the current system of no limits on the interest rates charged by payday loan stores, and I’m in agreement with the WCC – our laws must do more to protect the poor from predatory lending practices.

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One Response to Wisconsin Catholic Conference supports payday loan limits

  1. This is a tough issue any way you slice it. Yes, the interest rates are definitely very high on payday loans, often in the neighborhood of $20 per $100 loaned. But there are also credible studies such as those published by the Fordham Journal of Law & Finance which show that these high interest rates are not equating to high profit margins for payday lenders. Due to the high rate of borrower defaults, most lenders have margins of less than 5%. So it seems like lenders have to charge the rates they do to stay in business. That said, perhaps capping rates will increase the number of customers willing to accept the terms of a payday loan, reversing the effects hoped for by opponents of the industry at large.

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