Payday loans are short term small dollar loans that are intended provide a stop gap for an unexpected financial emergency. Payday loans in Wisconsin were declared legal by the State Legislature 138.14 and the official regulator is the Wisconsin Department of Financial Institutions.
About Wisconsin State
Wisconsin is in the Great Lakes area and is the 23rd largest state in the US. It is bordered by Minnesota, Iowa, Lake Michigan, Michigan and Lake Superior. The state is named after the Wisconsin River and in the Native American language, Chippewa, it means ‘Grassy Place’. Wisconsin has over 1.5 million residents and the largest city is Milwaukee where some 600,000 people live.
The economy of Wisconsin still relies heavily on agriculture and the state produces dairy products, beef, corn and soybeans. Wisconsin also has manufacturing, mining and many people work in the services sector.
Wisconsin joined the Union in 1848 and this is the point when the economy changed from being mostly agriculture and mining and moved towards transportation and lumber. In the 21st century, Wisconsin also has a thriving wholesale and retail trade where many people are employed. Famous retail and technological businesses based in the state are Wal-Mart, IBM and Infosys. Like many other large corporations, Wal-Mart is not famed for paying high wages thereby resulting in many of its employees taking out payday loans.
The city of Milwaukee
Madison is the capital of Wisconsin but Milwaukee is the largest city and is the main cultural and economic powerhouse of the state. It is a port city with excellent transport links that have helped to create economic wealth. However, in spite of the wealth that some people enjoy, in 2010 Milwaukee was reported as the fourth poorest city in the nation.
And, in 2017 statistics for the city showed the lowest median income in the state which was measured at $27,495 per year. Poverty in Wisconsin reached it highest level in 2016 and there are many low income families who rely on payday loans to help them through a financial crisis. The continuing gap between the richest and the poorest people in the state is just one reason why there are over 500 payday lenders operating in Wisconsin.
Economic data for Wisconsin
The economy of Wisconsin is driven by agriculture, manufacturing and health care. The unemployment rate is low at 2.3% but many people work in low income jobs and are unable to keep up with the high cost of living that continues to increase around the whole of the US.
Even though the state attempted to attract more jobs in 2011 by erecting signs that stated ‘Open for Business’, the results were mixed and the future job outlook still ranks amongst the 20 bottom states in the country.
The minimum wage is $7.25 per hour and this applies to most workers with the exception of students and tipped employees. This wage is in line with the federal figure but does not help those people who suddenly receive an unexpected medical bill or another financial emergency. Like every other state in the US where payday loans are legal, Wisconsin applies its own regulations and these are shown below.
Basic rules for payday loans in Wisconsin
When payday loans were made legal in 2010, some lenders sought to avoid the restrictions and started to offer installment loans which do not come under the same regulations as payday loans. Lenders offering installment loans are not obliged to make any affordability checks on borrowers and the loans are not registered on the state database.
The basic rules for payday loans include a maximum time limit, a maximum sum that can be borrowed and limits on collection fees although there is no interest rate cap.
Terms of payday loans
Wisconsin has a much larger lending limit than almost any other state. The maximum amount that can be borrowed is $1,500 and the sum includes all fees. Or, the maximum is limited to 35% of the borrowers gross monthly income whichever is the lower figure. There is no minimum term but loans must run for no longer than 90 days. Again, this is a longer term than that allowed in most other states.
The maximum amount that can be borrowed with a payday loan in Wisconsin is $1,500 and the sum includes all fees.
There are no limits for finance fees or interest rates and this mean that there is no quantifiable figure for a $100 loan over a period of 14 days. Each lender applies their own rates so it is important to check this figure before agreeing to any payday loan. The lack of regulations concerning interest rates makes payday loans in Wisconsin some of the most expensive in the country.
Limits of debt
The laws in Wisconsin do not put a limit on the amount of outstanding loans that can be taken out at any one time as long as the total borrowing does not exceed $1,500 or 35% of an applicant’s monthly income.
One rollover or renewal loan is allowed so if the borrower cannot afford to make the full repayment, another loan can be taken out to carry over the debt. But, only once. When this second loan runs out the debt must be repaid in full.
There is a 24 hour cooling off period after paying off a renewed loan or after the borrower has made use of an installment plan to clear the debt. Lenders may not add any more fees for an installment plan to taken out to pay off an outstanding loan.
Limits of collection fees
A fee of $15 may be charged for non sufficient funds. Only one attempt at check cashing can be carried out by the lender. This rule prevents the borrower from building up further debt by constant attempts to collect the loan repayment.
Lenders can charge 2.75% interest per month if there is a default on the loan and this fee will continue until the debt is cleared. No fees are allowed for repaying the loan early and no fees other than the 2.75% interest can be added for a default or late payment. Criminal action against borrowers is prohibited under the ‘worthless check’ ruling.
Poverty and payday loans in Wisconsin
In the 2013 report Payday Lending Abuses and Predatory Practices, Wisconsin was declared a state that does not apply meaningful regulations relating to payday loans. Data from the report showed that there were 423 lending stores in the state and that $76,652,781 was paid out in loans with the borrowers paying $22,459,265 in fees. The lack of restrictions on the amount of a loan had created a situation of snowballing debt amongst the people who needed small loans the most.
Many borrowers took out loans one after another and ended up in a cycle of unpayable debt. Lenders in Wisconsin that work out of stores cannot set up shop within 1,500 feet of another store and they are also not allowed to be within 150 feet of residential buildings. However, these limited restrictions did not prevent payday loans from being commonly used and many low income families have been unable to get out of the debt that has been created by almost limitless loans.
Qualifications for payday loans
It is very easy to get a payday loan either by going to a lending store or by looking online. The only requirements are that the applicant is an American citizen or is a permanent resident of the US. Applicants also need to provide proof of identity and income, a social security number and details of an active checking account.
Payments from state benefits will qualify as regular income as will a disability benefit or unemployment pay. But, if you are living on benefits, a payday loans is not the best course of action to help pay for bills.
Assistance programs in Wisconsin
Wisconsin does have some assistance programs that can help families who are in financial difficulty. The Wisconsin Home Heating Assistance program and the Home Weatherization Program are just two of the schemes in place to assist families who are in need of financial help with high energy bills. In addition, debt counselors can be found by contacting the ACCC, the Credit Counseling Professionals. Advice is free for anyone who is having problems with credit or debt.
Payday lending in Wisconsin
There are currently 499 payday lender companies based in Wisconsin and more can be found online. In 2015 – 2016, 6.2% of adults took out a payday loan and the average amount was for $387. Females borrowed more than males with the split being 55% to 45%.
Predictably, individuals who were earning less than $15,000 per year took out the most number of loans and renters took out more loans than homeowners. 49% of loan applicants were employed full time and 36% were married.
State legislation for payday loans
Regulations for payday loans in Wisconsin are overseen by the Wisconsin Department of Financial Institutions. This is another organization that provides debt counselors and consumer credit counselors for anyone who has serious financial problems.
Lenders must be licensed and are required to provide all consumers with full information about the process of borrowing. This information must be in plain English and must give full details and an explanation about how the loan will work.
Loan agreements must include an itemized list of interest rates and repayment fees. Each client must be provided with a copy of the agreement. Lenders are required to point out the fact that payday loans are only meant to be for a short term and should not be used on a regular basis.
All charges and collection fees for late or non payment must also be included in the contract. So, as there is no limit to the amount of interest that is allowed, it is very important to read any agreement carefully before signing the document. Lenders may make attempts to recover the sum of a dishonored check but must not harass or threaten the borrower.
Why use a payday loan?
In 2017, Wisconsin has twice as many payday lenders as it does branches of McDonalds restaurants. Until 2010, there were no regulations at all for payday loans but eventually the laws were put into place that limited the amount borrowed to $1,500 or 35% of the customer’s gross monthly income. While household incomes are on the rise in Wisconsin, sadly the poverty rate has remained above 10.8% since 2007 when the financial crisis began. Residents are still turning to payday loans and whilst this can be helpful, unless the regulations are strictly adhered to, more and more families are liable to get into debt.
Paying off a loan
The contract period for a payday loan in Wisconsin must not exceed 90 days and when the repayment is due the lender will either present the post dated check to the bank or withdraw the funds directly from the designated bank account. If there are not enough funds in the account there will be a $15 non sufficient funds fee to pay. Any consumer who believes that the lender has not acted lawfully can make a complaint to the regulator at the following address:
Wisconsin Department of Financial Institutions
201 W Washington Avenue
Summary for payday loans in Wisconsin
Payday loans in Wisconsin are not subject to strict regulations so it is important to be aware that using this kind of loan constantly can be a debt trap. The maximum loan that can be taken out is $1,500 or 35% of the gross monthly income of the applicant and the maximum term of a loan is restricted to 90 days.