Credit union lobbyists with the Wisconsin Credit Union League gear up to support a cap the interest on so-called payday loans at 36%, but pointed out the state's credit unions are already fighting the problem.
"Because not-for-profit credit unions exist to serve members, not drive profits, a credit union offers loan terms in members' best interest," says Brett Thompson, president/CEO of the Wisconsin Credit Union League. "Lawmakers want to protect consumers because for-profit, non-traditional lenders don't operate that way."
The bill being introduced to the legislature this week would cap interest rates on consumer loans at 36%. Wisconsin is the only state with no rate cap on licensed lenders. Lawmakers have expressed concerns that payday lenders target low-income areas and the high interest of their loans has trapped consumers in debt.
Thompson says credit unions, however, have helped members with payday loan alternatives that not only typically cost less than half what non-traditional lenders charge, but also encourage borrowers to begin saving, receive counseling and make better choices to transition into more traditional loan products offering lower rates. He says just a handful of credit unions pioneered payday loan alternative programs a few years ago but now the number of credit unions offering such programs has grown more than eightfold, to more than 60.
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