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Issue of the Week: Regulating Payday Lenders

Plus Heroes and Jerks of the Week

Sep. 30, 2009
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Payday lenders prey on the working poor by providing extremely high-interest loans (for example, a 10-week loan for $200 could cost an additional $200 in interest and fees). This issue was so serious that Donald Rumsfeld, former secretary of defense for President Bush, found that having payday lenders near military bases was a threat to members of the military. Rumsfeld supported legislation very similar to the Wisconsin bill authored by Rep. Gordon Hintz that limits interest to 36% a year.

Rep. Hintz’s Assembly Bill 392 to regulate payday lenders has been referred to the Committee on Financial Institutions, where it is almost certain to die. Why is AB 392, which is about as clear an example of good public policy as the Legislature has dealt with in the past several years—and which has strong bipartisan support, ranging from progressive Milwaukee legislators like Rep. Jon Richards and Sen. Lena Taylor to very conservative Republicans like Sen. Glenn Grothman of West Bend and Sen. Alan Lasee of De Pere—not going to pass? The answer is simply that payday-lending stores are very, very profitable and the companies that own them, many from out of state, have paid big money to hire 27 lobbyists to fight this bill.

So here is how it works. When a bill is clearly for special interests, as this one is, it is too difficult for the lobbyists to simply ask a majority of the legislators to vote to screw over their poor and middle-income constituents in favor of preserving the profits of wealthy loan sharks. Instead, the payday lenders have one of their “industry friendly” legislators introduce a watered-down, ineffective, industry-written bill to compete with the real legislation. This bill is AB 311. Then industry puts forth bogus arguments, including claims that the passage of the real bill would put lenders out of business and that people in need of quick cash would be out of luck.

The fact that payday lenders are making money in at least 14 other states that have laws that are as strong as the Wisconsin bill does not stop them from promulgating their lies. After they create their phony bill, AB 311, and their lies about the real bill, AB 392, they convince the leadership of the Legislature to refer both bills to a committee—in this case, the chair of that committee, a Milwaukee legislator, has publicly stated that he does not see any problems with the payday loan situation. This support for the payday loan industry comes on the heels of a report by the nonpartisan Wisconsin Legislative Reference Bureau which stated that the annual interest rate on these payday loans is 542%. So for each $100 borrowed, a person pays more than $500 in interest in a year.

But the committee chair will hold hearings on the bills and, low and behold, in all likelihood the phony bill AB 311 will be voted out of committee and the real bill AB 392 will die in committee. Then when AB 311 eventually passes, these “industry friendly” legislators will brag about how they helped the average Wisconsin resident while all of the abuses continue.

Heroes of the Week: Tomas Kelnhofer, Liliana Kelnhofer and Roselia Hernandez

Among the honorees at the 2009 Milwaukee Riverkeeper Bash was Tomas Kelnhofer, a teacher at Hayes Bilingual Elementary School. Kelnhofer, his wife, Liliana, and Roselia Hernandez were recognized for their efforts to preserve our local waterways. The trio was lauded for integrating environmental stewardship into a fifth-grade curriculum that is “centered on raising awareness of the Kinnickinnic River and engaging students, teachers, families and local residents in efforts to improve this important asset to their community.” They have mobilized the community in multiple environmental efforts, including river cleanups and assisting in the planting of the Cleveland Park rain garden. The Shepherd acknowledges the initiative and efforts of ordinary citizens like the Kelnhofers and Hernandez who take the time to make Milwaukee a healthier, greener community for everybody.

Jerk of the Week:Wisconsin Manufacturers & Commerce

Wisconsin Manufacturers & Commerce (WMC) touted the results of its recent “poll” as evidence that Wisconsinites are largely opposed to proposals aiming to curb harmful greenhouse gas emissions in the state. Proposals by Gov. Jim Doyle’s Global Warming Task Force, which have yet to even be debated, promote the expansion of existing clean energy sources, such as wind farms, and further investment in green technologies. That can’t be comforting to WMC, which represents some of the biggest energy producers (and polluters) in the region. So WMC’s poll questions were phrased to achieve its desired result, using language essentially asking: “Would you support renewable energy mandates if it meant you would lose your job?” Perhaps WMC could lower its membership dues if it didn’t waste money on phony polls.


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