SB 99

Under current law, as created in

2009 Wisconsin Act 405

, a person must be

licensed by the Division of Banking (division) in the Department of Financial

Institutions to originate or service a payday loan involving a Wisconsin resident.

Current law does not impose a limit on the interest that a payday loan licensee may

charge, before the maturity date, on a payday loan. However, current law prohibits

a licensee from charging interest after the maturity date of a payday loan when the

loan is not paid in full by this maturity date. A payday loan under which interest is

charged after the maturity date is not enforceable.

This bill limits the interest rate that a payday loan licensee may charge, before

the maturity date, on a payday loan to an annual percentage rate of 36 percent. A

payday loan on which a greater rate of interest is charged is not enforceable.

Under current law, a lender other than a bank, savings bank, savings and loan

association, or credit union (financial institution) generally must obtain a license

from the division to assess a finance charge for a consumer loan that is greater than

18 percent. This type of lender is generally referred to as a "licensed lender." A

"consumer loan" is a loan made to an individual for personal, family, or household

purposes that is payable in installments or for which a finance charge may be

imposed and includes most transactions under an open-end credit plan such as most

credit card debt. A "finance charge" is the sum of all charges payable by the customer

as an incident to or condition of the extension of credit, including interest and other

costs and fees to the extent not specifically designated by statute as permissible

charges of the creditor. Consumer loans are largely regulated under the Wisconsin

Consumer Act. With certain limited exceptions, current law provides no maximum

interest rate or finance charge for a consumer loan, including those made by a

licensed lender.

This bill expands the class of creditors that are considered "licensed lenders"

and are subject to the licensing requirements as such. Under the bill, a lender other

than a financial institution that makes consumer loans exceeding $5,000 in principal

amount must also obtain a license from the division and is a licensed lender.

The bill also prohibits a licensed lender from charging an annual percentage

rate of interest greater than 36 percent. However, this maximum interest rate does

not apply to an open-end credit plan, including most credit card debt, or to a

consumer loan secured by a first lien security interest in a mobile home or

manufactured home. The bill also does not affect the maximum interest rate under

current law of 12 percent per year for consumer loans after their final scheduled

maturity date. If a licensed lender violates the 36 percent interest limitation, the

loan is not enforceable.