Supporters of payday loan regulations rally in Eau Claire – WQOW TV: Eau Claire, WI NEWS18 News, Weather, and Sports
Supporters of payday loan regulations rally in Eau Claire
Eau Claire (WQOW) – Supporters of proposed government regulations on payday loans held a rally Wednesday in Eau Claire.
Payday loans are often known as a quick fix for cash, but the Consumer Financial Protection Bureau (CFPB) is proposing three big switches for the short-term loans that typically carry high interest rates and could keep borrowers in endless cycles of debt. Those include making sure borrowers can afford to pay off a loan, ending what is called the “debt trap” cycle and regulating penalty fees.
Sandra McKinney said she became a victim of payday loans 15 years ago. She was working in Missouri where her church was headquartered, living paycheck to paycheck. McKinney said she had a family member in Iowa who passed away and needed to get back to the Midwest. She borrowed $300 from a payday lender.
“I lightly got caught up in the cycle of payday lending, not even realizing the interest I would be charged and how hard it would be to get out of the cycle,” McKinney said. “It took me six months.”
The CFPB said each month, 80 percent of payday loans are re-borrowed. The Wisconsin Public Interest Research Group (WISPIRG) said the average Wisconsin payday borrower takes out 12 loans a year.
“The business model relies on the fact that many borrowers will not be able to repay that initial puny loan, and then getting borrowers to come back again, and trapping them into a cycle of debt,” Peter Skopec of WISPIRG said. “These loans have devastating impacts for individuals, families, and for the economy overall.”
According to WISPIRG, national average annual percentage rate (APR) is 391 percent, but it is 589 percent in Wisconsin because it is one of four states that does not cap interest rates.
“There are three times as many predatory lenders in Eau Claire than there are McDonalds restaurants,” Jeff Smith with Citizen Activity said. “This is a practice that has exploded because they are making so much money off of the poor that they target. We cannot permit these unscrupulous sharks and their lobbying pressure influence our lawmakers and bureaucrats into weakening these regulations.”
Payday lender Advance America said the proposed regulations could do more harm than good.
“I think they have the very real potential to decimate the industry,” Advance America Senior President of Public Affairs Jamie Fulmer said. “What the bureau has stubbornly failed to recognize is that the consumer has a need. What happens if they are denied access to this credit? They still have that need and are coerced to turn to often times higher cost and less regulated options.”
Fulmer said they see high satisfaction rates from their customers. He believed the consumer should be the one making choices for taking out loans, not regulators. He said their interest rates are fair when considering the cost of late fees from banks, landlords, and credit card companies that could pile up if people do not come up with quick cash.
“There needs to be suitable balance of regulation, but following the regulatory process in a vacuum can lead to dangerous consequences for the consumer,” Fulmer said. “The bureau and consumer advocates love to confuse the issue by not differentiating inbetween legal, legitimate, regulated lenders, and those illegal operators.”
Payday opponents said the regulations could expose solutions, making it lighter for more responsible lenders or nonprofits to come in the market and provide credit to people who need it.
Those in support of regulations said there were still some loopholes they desired to close including exemptions for how the capability to repay is calculated and not having a cap on interest rates.
The CFPB opened up its proposals for public comment until Sept. 14.