MADISON, WI – Faith leaders and consumer and low-income advocates participated in a joint press conference call to detail the harms of payday and high-interest loans on individuals, families and communities across the state. The WISPIRG Foundation was joined by Ron Alexander, President of the interfaith organization NAOMI in Wausau; by Rev. Marian Boyle of Green Bay’s West Side Moravian Church and interfaith organization JOSHUA; by Pete Koneazny, Litigation Director of the Legal Aid Society of Milwaukee; by Kevin Kane, Organizing Director at Citizen Action of Wisconsin; and by State Representative Gordon Hintz, to release a new fact sheet on the impact of predatory high-interest loans on Wisconsinites.
“Payday loans are among the most predatory forms of credit on the market,” said Peter Skopec, WISPIRG Foundation Director. “These loans are debt traps by design. They have devastating impacts on individuals, families and communities across Wisconsin and result in a cascade of financial consequences, such as increased overdraft fees, delayed medical care, and even bankruptcy.”
In the coming days, the federal Consumer Financial Protection Bureau (CFPB) is expected to present a new administrative rule that could rein in the worst abuses of high-interest lenders and encourage more responsible lending practices. Advocates urged the CFPB to require that lenders confirm a potential borrower’s ability to repay a high-interest loan, and to stop abuses related to payday lenders’ direct access to consumers’ checking accounts.
The WISPIRG Foundation’s fact sheet shows that although often marketed as having “reasonable” fees or charges, the average payday loan carries 589 percent annual interest in Wisconsin. High-interest lenders’ business model relies on borrowers’ inability to repay an initial small-dollar loan and then trapping consumers in a spiral of growing debt, piled-on fees and skyrocketing interest rates. These loans are routinely targeted at low-income Wisconsinites and at people of color, with devastating impacts for already vulnerable communities.
The fact sheet’s key findings include:
- The average payday loan in Wisconsin is $320 and carries an APR of 589 percent.
- The average Wisconsin payday borrower pays more in finance charges and fees than the cost of the original loan. For example, a typical payday borrower will pay more than $866 in finance charges for a $320 loan.
- The payday and auto-title loan industries contributed more than $242,000 to candidates for state office between 2010 and 2014, and major payday lending companies PLS Financial, Select Management Resources, Advance America, and AmeriCash Loans spent a combined $273,800 lobbying state elected officials in 2015.
The Wisconsin Public Interest Research Group Foundation is a non-profit, non-partisan public interest advocacy organization that stands up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society.