Payday Reform Legislation limits consumer choices/threatens privacy
Last week the Wisconsin State Assembly voted to pass Substitute Amendment 1 to Assembly Bill 447. This is payday lending regulation that places a cap on the overall loan amount for short term loans, prohibits rollovers, and bans consumers from seeking more than one short term loan at a time.
Proponents of the bill will tell you that this is a consumer protection bill, that it was drafted to protect Wisconsin consumers from an industry’s predatory loan practices. What they don’t tell you is that the bill limits choices and in reality hurts consumers who depend on access to credit via short term loans.
First, at a time when access to funds is already limited, Wisconsin does not need additional regulations restricting individual’s access to personal finances. In a consumer’s time of need, the bill limits the amount consumers can borrow. The amount arbitrarily sets a cap of $600 (including principle and interest) or 35 percent of gross income. This cap establishes Government (not the private sector) in determining who is loan worthy (at what amounts) and who is not. This “big brother” approach to consumers’ private financial decisions is unnecessary and unwanted in Wisconsin’s financial marketplace.
Second, the bill threatens consumer privacy by creating a database of all short term loan borrowers. The substitute amendment provides that a database be established and maintained through a third party vendor of the Department of Financial Institutions. This database must capture and track all consumer personal information and activity of a specific financial service. This includes personal identifiable information of the consumer. Information retained could expand to personal identifiers such as name, address, phone number, and other personal financial data. The data would be transferred between the state and a for-profit vendor. The state of Wisconsin has not shown a good track record of keeping individual’s personal and private information secure and this provision directly threatens WI consumer privacy and opens the door for identity theft.
If you have concerns with the database, wait until you hear this. The consumers will be paying for the creation and maintenance of the database through a fee (tax). Every time the consumer attempts to borrow at a store, the consumer will be charged a dollar for the vendor to access the state-sponsored database. Whether the consumer receives the loan or not, they would be charged an additional dollar to pay for the start-up and maintenance of a database that threatens their very privacy.
Perhaps the most offensive part of the regulation is the inclusion of “cooling off” periods. The legislation requires a consumer to go through a 15 minute “cooling off” period prior to receiving a loan. This sets a dangerous precedent in which Government requires consumers to wait before receiving a private financial transaction. What’s next? Requiring consumers to wait 15 minutes before taking out money in an ATM machine so they best understand the fee they are being charged for withdrawing their own money?
The regulation also includes a 24 hour cooling off period after each loan repayment. Consumers who repay their balance and wish to take out a new loan will now have to wait an additional 24 hours to be eligible to commence the new loan. The borrower will have to make additional time the following day to come back and transact business.
The “Responsible Lending Act” is bad for responsible consumers. Consumer privacy is threatened with the introduction of yet another state sponsored database and individuals will lose their right to make personal financial decisions. And perhaps the most offensive part of the regulation is that consumers would be forced to endure an insulting, government mandated “quiet time” before engaging in a personal, financial transaction.
Milwaukeeans have an opportunity for their voice to be heard. I encourage everyone who believes they are a responsible consumer to attend the March 9, 2010 SDC public hearing on the shortterm loan industry. The hearing will be held at the Washington Park Senior Center at 4420 W. Vliet Street from 4:30 – 8:00 PM.
Marvin Walker, Chairman
Wisconsin Coalition for Consumer Choice
