Report: High-cost lenders in Wisconsin favor installment loans

WISPIRG Foundation

MADISON, Wis. — High-cost lenders have changed the tactics they use to gather exorbitant interest payments from Wisconsinites struggling with their finances, according to a new report, Wisconsin’s Debt Trap, released Thursday by WISPIRG Foundation. A decade after the state legislature redefined “payday loans,” only two of the top 10 high-cost lenders now offer those products, while most offer installment loans.

“Payday lending gets a lot of the attention for being predatory, but it isn’t the only debt trap in Wisconsin,” said Lucy Baker, WISPIRG Foundation’s consumer program associate. “There appears to have been a shift to larger, longer-term installment loans in order to avoid the state reporting requirements that payday lenders have.”

The report analyzed the 10 high-cost lending companies with the most locations in Wisconsin. They have a combined total of 296 licenses for stores in Wisconsin that offer payday, high-cost installment, or auto title loans. Nine of these 10 companies offer installment loans, five offer title loans, and two offer payday loans. 

In 2011, the state legislature redefined payday loans, which use uncashed checks as collateral, as loans requiring repayment in 90 days or less. Installment loans last longer than 90 days in Wisconsin and have fewer state reporting requirements than payday loans. Title loans are similar to installment loans but use automobiles as collateral. 

“Regardless of what ‘type’ of loan someone gets, they shouldn’t have to pay crushing interest rates,” Baker said. “Wisconsinites don’t have the time to worry about semantics when they’re worried about their next meal, having a roof over their heads and paying their electric bill. If it walks like a predatory loan and talks like a predatory loan, it’s a predatory loan.”

A sampling of APRs and payment schedules on lender websites showed double and triple digit interest rates that would result in consumers paying back more than two or three times the loan amounts.

“The interest rates and terms for high-cost loans are debt traps. They will only make a bad financial situation worse for consumers who are already having trouble making ends meet,” Baker said. “Interest rate caps work in the states that have them and are needed to protect Wisconsinites, too.”