Payday lending blossoms in Janesville
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JANESVILLE — While most lawmakers say it’s a step in the right direction, consumer advocates say Wisconsin’s pending payday loan legislation doesn’t go far enough to free borrowers from a cycle of debt anchored by sky-high annual interest rates.
Gov. Jim Doyle is expected to soon sign the legislation into law, ending months of debate and discussion that for a while sidetracked the personal life of Assembly Speaker Mike Sheridan of Janesville.
Wisconsin will become the last state to regulate the industry, which left untouched has grown exponentially.
In 1996, the state had 64 payday lenders that made 80,000 loans for about $11 million, according to the state’s Department of Financial Institutions.
In 2008, 542 offices processed 1.6 million loans for $723 million.
The industry has blossomed in Janesville, too.
In 1996, two payday lenders operated here. Today there are 12, and 75 percent of them are concentrated in a 1.2-mile stretch of Milton Avenue. The stretch of road from BudgetLine Cash Advance to Check Into Cash includes six other lenders.
On average, that’s one payday lending store every 264 yards.
The distance between Check ’n Go and LoanMax is about 150 yards. Employees at Janesville Quik Cash and National Cash Advance can wave at each other across Milton Avenue.
Forty yards separate the entrances to EZMoney Payday Loans and SpeedyLoan Corp.
Legislation’s likely effects
Debate lingers on the effect of the new legislation, but one aspect is clear. New payday lenders will be hard pressed to find a slot on Milton Avenue in Janesville.
The new law prohibits payday lenders from locating within 1,500 feet of each other or 150 feet of residential areas.
Grandfather provisions, however, will allow the eight existing stores on Milton Avenue to continue their operations.
Advocates for the poor say the bill did not go far enough because lawmakers declined to impose a cap on the interest rates that lenders charge.
Under the plan, loans would be limited to $1,500 or 35 percent of the applicant’s monthly income, whichever is less. Borrowers could cancel loans within 24 hours and could roll them over only once.
Auto title loans would be limited to one per customer for no more than 50 percent of the car’s value, excluding fees.
“It has been a long and winding road to get to this point, but we stood up to this predatory industry on behalf of Wisconsin’s consumers,” Rep. Gordon Hintz, D-Oshkosh, said shortly after the legislation’s passage in April. “The biggest problem with this industry is that it sets people up to fail by lending more money than can reasonably be paid back.”
J. Michael Collins, faculty director of the Center for Financial Security and a professor at UW-Madison, said he’s not convinced the legislation will mean much.
“I’m doubtful it will have a huge impact,” Collins said. “You can argue about whether that’s a good thing or a bad thing.
“I think all of this might be a little too late to make a significant impact. The industry has been hyper-active and proliferated to the point that we’ve probably already reached the saturation point.”
Loans in default
Plenty of people in Rock County have had trouble repaying the short-term loans. Four of the 12 payday loan stores in Janesville filed 84 small claims cases in 2009.
BudgetLine, for example, filed 46 of them and won judgments that averaged $738 in all but seven of its cases, according to the Rock County Clerk of Courts Office.
One case involved a Janesville woman who signed for a $100 cash advance Nov. 3 and agreed to pay back $122 a little more than a week later. She didn’t pay and lost a judgment for $246.50, the loan amount plus interest and court fees.
Another Janesville woman got a payday loan of $500 on Nov. 28 with the understanding that she would pay the principle plus $110 in interest Dec. 11. She didn’t and has yet to satisfy a total judgment of $734.50.
BudgetLine’s largest case last year involved a 38-year-old Edgerton man who signed for a $1,100 consumer loan Dec. 9. If he’d met his first deadline, the principle and interest would have totaled $1,342.
But he didn’t, instead rolling over the loan three more times and each time adding 22 percent to an amount that reached $2,435 before BudgetLine filed the small claims action. His wages at a Fort Atkinson manufacturer will be garnished until he satisfies the nearly $2,600 judgment.
Interest rate caps
Court records don’t include the specific loan and interest agreements, but it’s apparent BudgetLine charged the three individuals a finance charge of 22 percent.
That’s not an uncommon practice in the industry, which generally requires finance charges of 15 percent to 30 percent on 14-day loans.
In the BudgetLine cases, the finance charge translates into an annual percentage rate of nearly 575 percent.
A representative in BudgetLine’s Janesville office referred a reporter to Cash Choice, the parent company in Atlanta. A call to Atlanta was not returned.
It’s not unheard of in the payday lending industry for annual percentage rates to top 1,000 percent. Online lender Payday-Loan-Yes charges $30 for a $100 loan for four days, the equivalent of an annual rate of more than 2,700 percent.
As the Wisconsin legislation made its way through the Capitol, consumer advocates and others called for an annual percentage rate cap of 36 percent, which didn’t make the final bill
“Wisconsin lawmakers took a stand against payday and auto title lending, reining in an industry that can trap consumers in endless cycles of debt,” said Sheridan, who once favored the cap before changing his mind.
“We have set caps on lending and on rollovers, eliminating the bulk of payday lenders’ profits. I believe that these regulations will protect vulnerable consumers from the most predatory lending practices, and I will be watching to ensure that is their effect in Janesville.”
Collins said the legislation’s ban on rolling over payday loans more than once could help plug the void left by an interest rate cap.
“But it will be interesting to see how the rollover aspect is enforced,” he said. “When people are strapped for cash, they become pretty savvy.”
The industry perspective
The payday loan industry fought regulation, spending $669,000 last year on lobbying. Payday lenders also donated $75,000 to state lawmakers’ campaign committees last year.
Sheridan drew fire in January after acknowledging he dated a lobbyist for the parent company of Check ’n Go, which has a store on Milton Avenue.
On its website, BudgetLine says it has retail stores in Alabama, California, Missouri, Tennessee and Wisconsin. To see the effective rates in each state, the company asks visitors to click on a link that’s been disabled.
But the company does say “payday loan fees typically cost less than the customer’s alternatives.” It suggests that bank and merchant fees can cost three times the interest on a $100 cash advance, a $100 bounced check with $48 in penalties equals an effective annual percentage rate of 1,251 percent, and a $100 credit card balance with a $26 late fee equals an effective annual percentage rate of 678 percent.
“I’m worried that a payday loan will put me into a cycle of debt, and I won’t be able to get out of it” is one question on the company’s list of frequently asked questions.
BudgetLine’s answer: “The vast majority of our customers use payday advance loans responsibly and moderately. Sixty-six percent of our customers use payday advance loans to cover unexpected expenses and financial emergencies.”
Collins of UW-Madison said there are plenty of examples where people have used payday loans responsibly.
“It can certainly be a useful tool,” he said. “It can also be a tool that causes real problems for people.
“If nothing else, maybe this legislation will get people to think more about what they’re doing. But the problem is that people are cash-strapped, and it’s pretty tough to legislate against that.”
May 14, 2010 at 3:10 p.m.
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What and embarrassing profession. If I worked at one of these places and I met someone and they asked me what I did for a living I would like and say I was a gardener or something
May 12, 2010 at 3:38 p.m.
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There are no loopholes around a smart borrower. Think if we had spent our efforts on educating communities on sound money management instead of wasting time on getting lawmakers to try and run a special interest out of town…
May 11, 2010 at 1:05 p.m.
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Don't we still practice free enterprise in this state? Products and services exist because there is a demand for them. No demand for payday loans = no payday lenders. People should be able to make there own choices, good, bad or indifferent. The government should not regulate to protect people from themselves. People must have be responsible for the choices that they make. It is not the purpose of government to protect people from making bad decisions. Education and opportunity are the key. Teach people about how to use their money wisely and value good credit and payday lenders will go away because of lack of business. Payday lenders are lenders of last resort. How will cutting off the last hope for someone with bad credit help them? They will be forced to move to loan sharks and unregulated online payday lenders. You can hate payday loans if you choose, but to pick a specific legal industry and target it for elimination seems cruel. What's next the corner liquor store. Liquor and beer are legal but look at the problems they cause! How about the lottery or casinos? Don't they facilitate the same problems? Where do you stop?? What about grocery stores? Many people eat things that are not good for them?? Where will it stop?? Personal responsibility is the cornerstone of any society.
May 11, 2010 at 10:05 a.m.
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Frogger, I am with you. My point was thatout of the 12 companies, it looks like it is easy pickings to just lwer the rate and get all the business, however the ones that dont get paid back are the ones you hear about and also the ones that get charged 1000%. There is an alternative to thesse and it is called a bank, however they will scrutitinize the loan and thus NOT make the loan because the person has proven they cant pay back.
If I started one of these you bet I will make sure I have hig enough rates to cover my losses on the ones that cant pay back.
I also agree that public schools and private schools need to be teaching the importance of persobal finances. I belive some do, however it should be mandatory and start at an early age. Also teach them that they can live without credit cards and auto loans.
May 10, 2010 at 9:59 p.m.
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Maybe the folks at the title loan joint on the west side (not far from Walnut St.) can come up with a special arrangement with the swill mongers across the street for July 3rd. Instead of cash, they'll give credits for all the hooch you can carry from the house of grog and retch on loan for a lien on push pull or drag '70s era Bowtie Pick ups or AMF era HD's. Anyone with a sunburned neck gets a free Al Jolson poster, a lost episode of Hee Haw on Betamax video tape and a confederate flag puke bucket (just pay shipping and handling).
May 10, 2010 at 5:07 p.m.
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The article states "The new law prohibits payday lenders from locating within 1,500 feet of each other or 150 feet of residential areas."
Why? What difference does it make where they are located or how close together they are? More of the nanny state.
I have stated before that the schools, especially the government schools, need to teach basic financial literacy, starting in pre-school. By the time someone graduates from high school, they should fully understand personal finance. I wonder why the schools typically fail to teach this?
All that being said, if someone is stupid or desperate enough to frequent these places, that is their choice. And yes, the reason for the high interest rates is that these people typically have bad credit and are likely to default. Do you think these places are raking in the money (and maybe they are!)? Then start your own. Think they charge too much? Then start your own! Think they are taking advantage? Then start your own! Then you can be the benevolent loaner of money and run it any way you see fit. Good luck with that.
May 10, 2010 at 4:22 p.m.
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taxedtoomuch- Has anybody ever thought the reason the rate is so high is because they are NOT paid back or paid back on time. Sure they can sell your $100 car but that wont cover the $500 loan. They do not want to sell used cars.
The reason why other loan rates are high for people is because they have bad credit and did not pay on time in the past. You earned this rate soory. It is a huge risk they take to give you the money and you will pay dearly for that money with rate.
Is the rate here WAY too high. YES. Like others have said TRY to find another way!
One reason the people HAVE to go here is because they DON'T have a credit card. This is because their credit stinks. the credit doesn't stink "just all of a sudden" like the commercial with the hairy letters make you think. Just because you are "watching it" doesn't make it better. It gets better by paying your bills ONTIME.
Yes the 23% rate on a creidt card sticnks but they are going here because they earned it.
Yes sure some become down on their luck. They figure it out. Others don't care and WONT even try to pay.
Ever hear the commercial "why should I be obligated to pay this huge credit card debt"
WHY because you charged it. Why wouldn't you???
May 10, 2010 at 2:58 p.m.
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Looks like there is a market for offereing a service that will loan short term $$ cheaper than these 12 companies. I dont see any laws that say they have to charge a minimum %, however the less they charge would mean the more they would have to scrutinize the loan. If people wont do business with them then they wont stick around, however with 12 seperate stores following what looks to be the same basic business model of buying low and selling high, and all 12 of these are close to each other it looks as if there is enough demand at 1000% + APR to stay in business.
Maybee I will start one that only charges 250% APR............. Hmmm.
May 10, 2010 at 2:44 p.m.
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yes they will take advantage of the economy here as the people struggle to make ends meet these loan companies will bleed them dry with their interest rates as when you need to cover a bill or two they will borow and you will never get ahead. i got one years ago and went to pay back 100 it cost me 240 for 1 week. So before you think of these places find someone else. They will legally rob you blind and the government did not put a cap on interest, so they can do anything they want and the unjust legal system will always be a win for them
May 10, 2010 at 11:16 a.m.
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Joker, will you lay off about that fest? We all are sick of hearing about it! This article is about payday loans. Did you notice right below where we type there is an ad for "Sudden Payday", get cash fast! The Gazette has this on this page, mind blowing! Yes, you can get wrapped up in these loans real quick. JMO
May 10, 2010 at 10:28 a.m.
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I heard that some of these Payday lenders will be having a display booth at "Redneck Fest".
May 10, 2010 at 9:06 a.m.
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They diminish the quality of life in Janesville.
May 10, 2010 at 9:05 a.m.
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Does anyone find it ironic that the Google add between the article and the comments is one for online advance loans??????? GEESH!!
May 10, 2010 at 8:21 a.m.
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This is the most biased news story I’ve ever read. How many banks are in town? Put those on a map. I bet there are some right next to each other, and employees can wave at each other. These banks charge up to 3,000 percent interest for overdraft. I’m sure you can find plenty of people that were hit with overdraft charges. Or how many fast food places are there. I guess this nanny-state advocating newspaper could blame them for obesity.
May 10, 2010 at 7:59 a.m.
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For some reason the movie "It's a Wonderful Life" comes to mind. I think the analogy is that these places are the Mister Potters of our town but there's no Beford Savings & Loan company to play the good guy. So it's up to the individual to be aware and wary enough to make the decision instead of having to be saved from the pitfalls. The possibility of getting into an endless cycle of debt is enough to scare me away from them.
May 10, 2010 at 7:38 a.m.
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Just look at them ALL! They make the city look like a red light district!
JVL get the BANDITS out!
May 10, 2010 at 6:45 a.m.
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Mike and Shannon live happily ever after. With no cap on the interest rate charged the pay day loan joints will have a field day with Janesville folks down on their luck. What these places do is eventually suck the quality of life out of a city. Best thing to do is stay away and watch them go under. Thanks MIKE!
May 10, 2010 at 2:41 a.m.
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u forgot about security finance...and the banks!!!!!!!
May 10, 2010 at 12:32 a.m.
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evansvillehousewife, the credit card will be at a 22% APR (annual percentage rate). If you have $1000 in debt, at the end of the year they can add finance charges of $220 (more or less). But adding 22% every 14 days is an APR of over 1000%. At the end of the year, instead of owing $1220, you would owe the payday folks $175,000. Needless to say, they don't let it get that far, but that's the equivalent cost of their money -- over 100 times larger than a credit card.
May 9, 2010 at 11:22 p.m.
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Didn't this get the mob into trouble? All these People are LEGALIZED LOAN SHARK'S!!!!!!
May 9, 2010 at 10:10 p.m.
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I'd go homeless on the street before I borrowed money from those places.
May 9, 2010 at 9:07 p.m.
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NO, it is not a matter of life or death, but they are here for a reason. They didn't just build the buildings for nothing. And they know people nowadays WILL use them. It is simple math, no job, no money, need meds, need groceries, aha, lets go get a payday loan or a title loan. Happens every minute of every hour of every day. These posters that think they know everything and know everybodies lifestyle are starting to pee me off! Get a life and realize life is not made of fairies and butterflies, we live in an economic he__ right now!!!
May 9, 2010 at 9:03 p.m.
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No one has to go to them
May 9, 2010 at 8:49 p.m.
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Well, it says an interest rate of 22%. I have seen credit card offers that offer an APR of 23%. Get it Now furniture stores have the same rate. What is the difference- the ease of the immediate cash? While I understand the draw if the application is easy, it's not as if you MUST SIMPLY take out these loans or die;
May 9, 2010 at 5:09 p.m.
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These people are just loan sharks. The scum of the earth in my book. All they do is take advantage of desperate and sometimes, ignorant, people. In the Army what they do was a crime. I would like to see your politicians ban this horrid business practice.
May 9, 2010 at 4:48 p.m.
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If a person can do anything to avoid these places, such as a loan from a friend or family member, you would be much better off. You can get trapped in the cycle of rolling these loans over and before you know it, you owe them 3x what you borrowed plus interest. I have been there, done that, and will never, ever do it again! JMO
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