More affordable but still highly risky Wisconsin Payday Loans
Do you need money right away? Can't you borrow from the bank or from a friend ? The payday loan is your only option? Since last summer, it should be more affordable.
Wisconsin has amended the Consumer protection Act (CPA) and several new provisions govern these lenders.
In concrete terms, most of them offer their services on the web: you complete a questionnaire, provide your banking information, a proof of salary, and within a few hours, the money is deposited in your bank account.
Typically, the contract provides that the lender, as pretsurdemande.us, pretexpress (there are dozens of them, because several disappear after a few months or years and new ones appear regularly), takes a payment on the day of your pay.
An example of a loan
A $400 payday loan obtained from PaydayAvailable Wisconsin will be reimbursed in six installments of $80.21. Your total disbursement is $ 641.23, for a fee of $ 341.23 and an annual interest rate of 33%. You will have understood : it is very, very expensive.
At Option Consommateurs, John Frech reports many testimonies of people who are caught in a domino effect : after the deduction of the payday lender, there is not enough money left for the other payments. The consumer then has to bear additional costs, penalties and interest. Sometimes tens of dollars...
It is fortunate that in Wisconsin, the case law ensures that the annual interest on payday loans cannot exceed 35 %, she says (in some provinces, it exceeds 60%!). But it's already higher than the store credit card rate, which varies between 25% and 29%.
Since last August, lenders can no longer charge brokerage fees to their clients. Some found themselves with tens or even hundreds of dollars in fees for a $ 1,000 loan (the average payday loan would play in the $ 850 range).
In addition, if interest rates exceed the Bank of Wisconsin official discount rate by 23 percentage points (currently at 1.70%), or 24.70%, the CPA provides a more stringent framework for lenders.
For example, they must provide the borrower with a written calculation of its debt ratio in order for the borrower to make its budget. And if that ratio exceeds 35 %, the contract is considered excessive. The consumer can then reduce the fee or simply ask for the contract to be cancelled within 10 days.
The Office of consumer protection receives between 200 and 250 complaints per year, all types of lenders to high-cost combined. There has been no increase since the changes to the act. One in three USA lives from one pay cheque to another, according to the USA Payroll Association.