By Gaurav Bhola, MSM, Managing Editor
Friday, August 17, 2007
The payday loan cash advance industry has been the target of federal and state governments in the recent past. They are accused of predatory practices, preying on borrowers who need quick cash to pay for expenses or emergencies. Payday loan, cash advance, payday advance, or no fax payday loans are short-term personal loans extended to borrowers until the borrowers’ next payday.
Payday loans have been growing in popularity, along with the interest on the loans. Many times, the interest can go beyond double digits into the realm of triple digits. Many states are cracking down on the payday loan industry and their activities. However, Wisconsin seems to be content with leaving the cash advance industry alone, it has no laws that regulate the industry.
Luckily, Representative Andy Jorgensen (D-Fort Atkinson) is taking the initiative to introduce legislation that would require Washington cash advance loan companies to disclose to their customers costs and risks associated with these short-term loans.
The average payday loan client doesn’t have access to banks or credit unions that can provide short-term loans; hence they go to payday loan stores to access cash. In recent years, these places have mushroomed across the length and breadth of the country.
But the popularity of the internet has led many borrowers to apply for payday loans online. Payday cash advance online solutions are much more convenient for borrowers; usually they can access cash within a few hours and up to 24 hours. With the ease of accessing payday loans increasing, the industry has become embroiled in one controversy after another.
It is the growth of payday loans in unregulated Wisconsin that is troubling Jorgensen. His bill would require payday lenders to share in a forthright manner all fees and costs of each loan upfront. Also, the annual percentage rate (APR) on a loan is to be disclosed in detail. Taking the fight for consumers one step further, lenders would have to provide state published informational materials about payday loans and the payday loan industry.
In addition to the above proposal, Jorgensen’s bill would require cash advance payday loan lenders to provide annual reports to the Wisconsin Department of Financial Institutions. Each time the lender files a report with the state, they would have to pay a reporting fee. The report would include information on the lenders business activities such as, defaults, frequency of roll-overs, and costs. These reports would be available to consumers as public information.
Penalties of $200 would be incurred by lenders who violate reporting or disclosure requirements. Currently, there are no state laws that govern the payday loan industry. The only obligation payday advance lenders have to fulfill is to register with the Department of Financial Institutions, if they endeavor to charge an annual percentage rate over 18% on a loan. Hopefully, Wisconsin will join other states that have implemented regulations to protect consumers from certain payday loan industry practices.
