Wisconsin Republicans attempting to re-legalize auto title loans

Car title lending is the target of a re-opened discussion in the Wisconsin legislature. Image: Flickr / teegardin / CC-BY-SA

Last year, Wisconsin became the final state in the union to regulate payday and title lending. The original bill would have prohibited banning car title lending, but the governor vetoed that item to entirely ban title lending. Now, a joint committee is taking action to end the ban on title lending, which would de-regulate the industry.

Current regulations on Wisconsin’s payday lending industry

Currently in Wisconsin, short-term loans secured by an auto title are not legal. The selective vetoing of the 2010 legislation banned loans of this type. Payday loans in Wisconsin are also limited to 35 percent of a borrower’s monthly income. Once a loan comes due, additional interest cannot be charged, even if payment is late. In 2009, Wisconsin’s 527 short-term lender locations lent out $600.5 million.

Wisconsin GOP tries to rescind changes

Senate President Mike Ellis, a Republican, has been pushing this year for tighter regulations on payday loans. Despite his surprise at the recommendation of the Joint Finance Committee, Ellis agrees that the recommendations should be debated on the merits, rather than as a knee-jerk reaction. The committee’s co-chairman, Rep. Robin Vos, responded by saying “You can make a case that it was done wrongly the first time. We’re correcting his error and actually adding some better provisions in,” referring to the fact that the original bill as passed by last year’s legislature was significantly re-shaped by the governor’s vetos.

The difference between payday lending and title lending

Title lending and payday lending are often lumped in with check cashing and other short-term financial solutions. These financial products all cater to the underbanked community, but they each do so differently. Payday loans are short-term loans intended to be paid back in two to four weeks. Title lending, on the other hand, offers higher loan amounts, but puts the collateral, a vehicle, at risk. Check-cashing services charge a fee for cashing checks for customers. Each of these services is different and should be regulated and discussed differently.