MADISON, Wis. – Payday lenders in Wisconsin are making in excess of $200 million in loans at an average APR of 542.2%, according to a study conducted by the Wisconsin Department of Financial Institutions (WDFI). The average loan amount is $246.19 with an average finance charge of $49.73 and an average loan term of 13.99 days. Of greater concern to Wisconsin regulators and legislators, however, is the revelation that nearly 53% of the loans were rolled over one or more times. One borrower took out 30 loans in the one-year period studied. The Wisconsin state Senate is currently considering a bill that would limit payday loans to 5% of the loan amount. State Sen. Judy Robson, the bill's sponsor, said, "In Wisconsin these payday (lenders) have grown by leaps and bounds because they say they are filling a niche and that credit unions and banks have gotten out of the business of short term quick loans," said Robson. The study reported that the industry in Wisconsin grew from two companies with 17 offices at the end of 1995 to 40 companies with 211 offices in April 2001. Loan volume jumped from $11.2 million in 1996, the earliest year the study reports loan volume, to $200 million in 1999. The payday loan shops have sprouted up as other lenders have abandoned the limited-term small-loan market in favor of credit cards, leaving a vacuum in the market, noted Bob Hoel, executive director of the Filene Research Institute, Madison, Wis. "Many citizens are willing to pay (high rates) for small loans at so-called reasonable rates of interest," he said. While payday lenders are regulated by the WDFI, Wisconsin does not have a usury law that would limit the interest rate charged. Hoel said that astronomical-sounding APRs of payday loans stems from the high cost of making such short-term loans. "The (interest rate) calculation includes the cost of origination, you have to build that in (to the interest rate)," he said. Typical payday loans charge a fee of $50 or $60 for a $300 loan. Hoel said that the cost of origination of such a loan might be $20. Custom and regulation keep credit unions out of the payday loan business, Hoel said. While Wisconsin-chartered CUs could compete profitably in the payday loan business, loans by federally chartered institutions are capped at 18%, he said. The study analyzed a sampling of the loans at 17 of the 211 payday locations in the state during the previous 12 months and reported on the files of 321 borrowers. It found that the average age of borrowers was 39 years old with an annual income of less than $25,000. Because of reporting inconsistencies, the report listed 229 of the borrowers as having an average take-home pay of $18,675, while 54 had gross annual income of $24,673. The annual income was not reported for 38 customers. These averages do not reflect the income of spouses. WDFI Secretary John F. Kundert described the study as only a "tool to better understand the industry in Wisconsin and for the policy makers of the state to reference in their discussions of payday lenders." Robson, for one, appears ready to act. "Wisconsin should be regulating them a lot more," she said. [email protected]