MADISON, Wis. - A Wisconsin bill to strengthen laws regulatingpayday loans "does not go far enough" to protect Wisconsinconsumers, Gov. Jim Doyle noted in his April 15 veto of AssemblyBill 665. "The provisions of this bill do little to change thecurrent practices of payday lenders or to improve on currentconsumer protection laws. Consumers who turn to payday lenders intimes of financial need are often vulnerable and not in a positionto fully consider the terms of the agreement in the few minutes ittakes to process these transactions. Current law already limitsfees and interest paid on consumer loans for which principal isreturned within one day," Gov. Doyle said in explaining hisdecision. Brett Thompson, CEO and president of the Wisconsin CreditUnion League, says that while the league "did not have an officialposition on the bill, we did testify at hearings that credit unionsare an alternative to payday lenders." Thompson said that theleague expects to be involved "as we go forward for further debateon the issue." He said the WCUL wants to make sure the publicunderstands that credit unions could be an alternative to checkcashers and payday lenders. According to Doyle, too often paydayloans come at a very high price to those who can least afford topay it. A study by Wisconsin's Department of Financial Institutions(DFI) showed that the average annual net income of payday borrowersis less than $19,000 and that more than half of the loans analyzedwere refinanced. In his veto message, Doyle noted that thedepartment's authority has already been interpreted to protectpayday loan recipients from prosecution under worthless checkstatutes. He said that without a means of tracking payday loans,provisions limiting the number of consecutive transactions will beunenforceable. The bill would have modified provisions relating toconsumer loans commonly referred to as payday loans. Specifically,it would have: * required a payday lender before disbursing fundsto provide notice that compares the cost of the loan if paid infull to the cost if refinanced three times; * required the lenderto notify the loan recipient that a payday loan is not intended forlong-term financial needs, that it should be used only forfinancial emergencies and that consecutive payday loans willrequire additional interest and can cause financial hardship; *required payday lenders to inform a payday loan recipient thathe/she would have no obligation to pay interest or fees if the loanprincipal is returned by the close of business the day afterdisbursement of funds; * limited payday loans to four consecutivetransactions, terms not to exceed 35 days and a disbursement not toexceed $5,000. The $5,000 limitation on a payday loan would havebeen adjusted annually for inflation under rules to be promulgatedby the DFI. * prohibited a payday lender from initiating orthreatening to initiate criminal prosecution for failure of arecipient's check or electronic transfer to be paid by thefinancial institution from which it was drawn. Doyle urged theLegislature to work with his administration and other concernedgroups to draft legislation that will make real changes in theregulation of payday lending and that will ensure the protection ofWisconsin consumers. "In 2003, Wisconsin's payday consumers paidnearly $85 million in payday lending fees, and more than 90 percentof those fees went directly to out-of-state companies. Thisindustry has a huge economic impact on our communities and we needto seriously address this issue," he stated. Kathryn Carlson,executive assistant for the Wisconsin DFI, said A.B.665 did noteven offer a minimum combination of requirements the agency wouldlike to see, noting that in a review of other states' legislation,Florida and Indiana payday loan laws were good models. While notingthat it is not all or nothing, Carlson said some discussion pointsfor future legislation might include: * A rollover limit. "It needsan enforcement mechanism behind it, a database, so it can bedetermined if a person has too many rollovers or doesn't. In theabsence of that database, a payment plan provision could insurethat after four rollovers, the lender would have to put theconsumer into a payment plan to start paying down the principal,"Carlson explained. * Possible limits on fees charged. * A higherminimum term. She said the bill gave a "fuzzy" idea of payday loansas being between three and 31 days. * A smaller maximum amount."The average across the states is $550. The bill's was $5,000."Carlson said 29 states have a maximum under $1000 with 26 of thosestates including all states bordering Wisconsin having cappedamounts of $500 or less. * Some discussion on the number ofconcurrent loans or the maximum amount out at one time. Carlsonsaid the bill's "net effect on consumers would have been minimal.It would not have changed the current climate at all. Paydaylenders still fall under the Wisconsin Consumer Act and still areregulated."