>> SURE, THANK YOU, APPRECIATE
IT.
>> IN OTHER NEWS WHEN SOMEONE
NEEDS A QUICK SHORT-TERM LOAN,
THEY CAN TURN TO PAYDAY LENDERS.
WISCONSIN BORROWERS END UP
PAYING MORE ON THE BACK END
BECAUSE OF HIGH INTEREST RATES
AND FEES.
ACCORDING TO NEW POLICY BRIEF.
WHERE SHOULD YOU TURN IF YOU
NEED QUICK CASH?
MELANIE, PROFESSOR JOINS US,
THANK YOU FOR BEING HERE.
>> THANK YOU FOR HAVING ME.
I WANT TO SET THE TABLE, PEW
FOUND WISCONSINITES PAY AN
AVERAGE OF 395 FEES WHEN
REPAYING 500 LOANS OVER THE
COURSE OF FOUR MONTHS AN
INTEREST RATE OF 338%.
WISCONSIN DOESN'T CAP THOSE
RATES.
A PERSON WOULD HAVE TO BE
DESPERATE.
IS THAT WHO IS BORROWING?
>> IN TERMS OF CONSUMER BASE FOR
PA LOANS, THEY ARE GENERALLY
MORE CREDIT CONSTRAINED ON
AVERAGE.
RESEARCH HAS SHOWN CONSUMERS
TURN TO PAYDAY LOANS AFTER
EXPLORING OTHER CREDIT OPTIONS
INCLUDING PLAUSIBLE, AVAILABLE
FUN
FUNDS.
THERE IS A CREDIT CONSTRAINT
ELEMENT AS WELL AS YOU KNOW,
PAYDAY LOAN CONSUMERS TEND TO BE
LOWER INCOME ON AVERAGE.
BOTH INCOME AND CREDIT
CONSTRAINTS PLAY A ROLE.
>> SO IF A PERSON IS CASH
STRAPPED IN THIS WAY, HOW DO
THEY PAY THESE PAYDAY LOANS
BACK?
>> AND SO, ON PRINCIPLE, PAYDAY
LOANS ARE DESIGNED TO BE SHORT
TE
TERM.
SO SOMETHING THAT ONE WOULD RELY
ON IN BETWEEN PAY PERIODS AND
THIS IS ALSO CHARACTERIZED AND
TEND TO BE SMALL LOANS.
IT IS AVAILABLE FOR A FEW
HUNDRED DOLLARS AS OPPOSED TO
SAY THOUSANDS OF DOLLARS THAT
ONE MAY USE A PERSONAL LOAN FOR
AT A BANK OR CREDIT UNION.
AND SO GIVEN THE SMALL DOLLAR
AMOUNTS, WE WOULD LIKE TO
BELIEVE ONE WOULD BE ABLE TO
REPAY THOSE IN A ONE OR TWO-WEEK
TIME FRAME.
AND AND OTHER THINGS LIKE
RESULTS UNABLE TO PAY THE LOAN.
>> YOU DESCRIBE ROLLING OVER THE
LOAN, I AM ASSUMING IF THAT
HAPPENS AND PEOPLE UNABLE TO PAY
FEES JUST KIND OF KEEP ACCRUING
THERE?
>> RIGHT, SO THERE IS THAT
CAPITALIZATION ELEMENT.
SO IF YOU ARE ROLLING OVER A
PAYDAY LOAN, YOU ARE EFFECTIVELY
BORROWING NOT ONLY FOR THAT
INITIAL PRINCIPLE, BUT ALSO THE
INTEREST IN FEES CHARGED THAT
WERE ACCRUED FROM THAT INITIAL
BORROWING OF THE LOAN.
>> TWO QUESTIONS, ARE THESE
LOANS PREDATORY OR A PLACE FOR
PAYDAY LOANS?
>> SO THAT IS A MAJOR DEBATE
OCCURRING RIGHT NOW.
SO WE DON'T FULLY KNOW WHAT THE
WELFARE IMPLICATIONS OF THESE
LOANS ARE AT THIS TIME.
AND SO WHEN IT COMES TO EVEN
SUBSTITUTION FOR EXAMPLE, PLENTY
OF PAPERS SHOW THAT AN EVENT
THAT PAYDAY LOAN, HIGHEST
OCCURS, SOME CONSUMERS MAY TURN
TO OTHER LOANS, AS WELL AS EVEN
RESORT TO BANK OVERDRAFTS.
AND DEPENDING ON HOW MUCH ONE
MAY OVERDRAFT FROM A BANK
ACCOUNT, THAT COULD PROVE MORE
EXPENSIVE IN BORROWING A PAYDAY
LOAN.
SO MUCH OF IT TENDS TO BE
CIRCUMSTANTIAL.
>> YEAH.
QUICKLY WITH HALF MINUTE LEFT,
YOU KNOW WISCONSIN LEGISLATURE A
YEAR AGO TRIED TO PASS 36% CAP
ON PAYDAY INTEREST RATES.
THAT DID NOT PASS.
IS THAT THE RIGHT MOVE IN YOUR
MIND?
>> SO THE 36% CAP IS CERTAINLY
THE MOST COMMON FORM OF PAYDAY
LOAN WE SEE GIVEN THAT NUMBER
HAS SHOWN TO BE IN UNPROFITABLE
RATES FOR LOANS TO OPERATE.
ANOTHER OPTION COULD BE MIM
MIMICKING THE MODELS, HAWAII,
COLORADO, VIRGINIA HAVE
IMPLEMENTED CONCERTING SINGLE
USE PAYDAY LOANS INTO THE LOWER
COST INSTALLMENTS THAT CONSUMERS
CAN USE INSURING THEY CAN GET
THE SMALL DOLLAR LOAN AS WELL AS
HAVE ENOUGH TIME TO PAY THEM
BACK AT AN AFFORDABLE RATE.
>> OKAY.
PROFESSOR HARVEY, THANK YOU FOR
YOUR INFORMATION ON THIS.