SB 759

This bill limits the maximum interest rate that may be charged on a consumer loan and makes other changes related to the Department of Financial Institutions’ regulation of consumer lenders.

Under current law, with certain exceptions, a person must be licensed by the Division of Banking (division) in DFI to make, take an assignment of, or collect payments on a consumer loan with a finance charge of more than 18 percent per year. A “consumer loan” is defined as a loan made by any person to a customer 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. This type of lender is generally referred to as a “licensed lender.” Under the exceptions, financial institutions and their affiliates, payday lenders, collection agencies, payment processors, and certain others are exempt from regulation as licensed lenders. Consumer loans are also 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.

The bill generally prohibits a licensed lender from charging an annual percentage rate (APR) greater than 36 percent on a consumer loan. However, the bill does not affect pawnbrokers’ loans and 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 APR limitation, the consumer loan is not enforceable.

Current law specifies that a person makes a consumer loan, for purposes of the requirement to be licensed by the division, if the person is named as the lender in the consumer loan agreement.

The bill specifies that a person also makes a consumer loan, regardless of whether the person purports to act as an agent, service provider, or in another capacity, if 1) the person holds, acquires, or maintains the predominant economic interest in the consumer loan; 2) the person markets, brokers, arranges, or facilitates the consumer loan and holds the right or first right of refusal to purchase the consumer loan or any interest in or receivable from the consumer loan; or 3) the totality of the circumstances indicate that the person is the lender with respect to the consumer loan and the transaction is structured to circumvent or evade the requirements applicable to licensed lenders. The bill specifies circumstances weighing in favor of a person being considered the lender on a consumer loan. The bill also specifies that a person may not engage in any device, subterfuge, or pretense to circumvent or evade requirements applicable to licensed lenders.

The bill further requires the annual report of a licensed lender to include specified additional information, including the number of consumer loans with an APR exceeding 18 percent that it made or serviced during the preceding year; the average APR of these loans; and the number of these loans that, during the preceding year, were refinanced, were accelerated due to default, or resulted in a money judgment or vehicle repossession. The division must submit an annual report to the legislature summarizing the aggregated data reported by licensed lenders.