NEWS BLOG (WSAU) The people who use a payday loan store can’t borrow money any other way. You’d get a bank loan, or use your credit card, or even borrow from friends or family before you’d pay the high interest rates and fees that your neighborhood payday loan store charges.

And now the state is unveiling a new package of payday loan regulations. The bill is still subject to amendments, so some ideas may be dropped or added. Some of the proposals include a cap on interest rates (36%), limits on what percentage of a paycheck can be borrowed, how many times a payday loan can be rolled over, and a ban on loans where a car-title is used as collateral.

The heart of this issue is the role of government, as a big brother or a referee.

Most people would agree that presenting someone with two pages of fine-type legalese that the borrower can’t understand is an unfair business practice. If the government takes up the referee role, the bill should focus more on rules of disclosure. Simple language. Normal-sized letters that say very simply: if you don’t pay this money back, you’ll lose your car. Here’s how much you’ll pay each week. Here are our fees, and the interest rate we’re charging you.

But the state is opting for big-brother-like regulations. And it’s likely that some of them will pass. The end result is some customers will lose access to payday loan borrowing. Other stores will shut down and decide not to do business in Wisconsin.

One thing is certain. People who patronize payday loan stores are desperate for money. They will get their cash somehow. Some will resort to illegal activities, either theft or drugs. Others will borrow from loan sharks. It’s a strange kind of consumer protection law that blocks someone from borrowing from someone who might take their car, leaving them to do business with someone who might break their legs.

Chris Conley
Operations Manager-Midwest Communications, Wausau
2.10.10