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Wisconsin Judges ask Supreme Court to set Payday Loan Interest Rates
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By: Javi Calderon
Wisconsin Judges ask Supreme Court to set Payday Loan Interest Rates
A group of Wisconsin appellate judges has opened yet another chapter in the state’s tenuous wrestling match with payday loans by asking the state Supreme Court to define a limit for excessive interest rates.
In 2011 Wisconsin became the last state in the U.S. to adopt some sort of regulation for short-term credit products and auto title loans. In late 2010, former Governor, Democrat Jim Doyle, signed into law a very lax set of regulations, including a maximum payday loan limit of $1,500 and officially banning loans that use the customer’s car as collateral.
While at least 17 states across the country have adopted a 36% APR limit, Doyle’s regulations did not include an interest rate cap, only a statute that no loan can exceed 35% of the customer’s gross monthly income.
When Doyle was replaced by Republican Scott Walker, the traditionally payday loan-friendly Republicans thought he would scale back the already forgiving payday loan laws. Instead, only six months into their existence and some state officials are calling for the protections to be increased. A bill circling the state legislature that would limit loan APR at 36% has been garnering bipartisan support.
The Supreme Court’s involvement comes after a case where a lower judge ruled in favor of a cash advance customer who was failing to pay off her loans due to, what she believed to be, unconscionable interest rates. The lender argued that the judge has no position to deem the interest rate too high because the Wisconsin Consumer Act allows any interest rate. The defendant argued that what may be deemed “unconscionable” by one judge, might seem permissible to another, therefore opening the door to many, many more cased based on personal judgment, and a wide range of outcomes in those cases.
Unlike a decision made by a lower judge, a decision voted on by the state Supreme Court would become the statewide standard.
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