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2011 - 2012 LEGISLATURE
May 20, 2011 - Introduced by Senators Grothman, Taylor, Wanggaard, Ellis, T.
Cullen, Hansen
and Carpenter, cosponsored by Representatives Wynn,
Nass, Hintz, Bernier, Spanbauer, Petryk, Rivard, Bies, Petrowski, Pasch,
Hebl, Molepske Jr
and Knilans. Referred to Committee on Financial
Institutions and Rural Issues.
SB99,1,4 1An Act to renumber and amend 138.14 (10) (a) 1.; to amend 138.09 (1m) (a),
2138.09 (7) (bp), 138.14 (13) (d) and 422.201 (3); and to create 138.09 (7) (bs) and
3138.14 (10) (a) 1g. of the statutes; relating to: interest rates on payday loans
4and loans by licensed lenders.
Analysis by the Legislative Reference Bureau
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.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB99, s. 1 1Section 1. 138.09 (1m) (a) of the statutes is amended to read:
SB99,3,22 138.09 (1m) (a) Before any person may do business under this section, charge
3the interest authorized by sub. (7), or assess a finance charge on a consumer loan in
4excess of 18% per year, or make a consumer loan exceeding $5,000 in principal
5amount,
that person shall first obtain a license from the division. Applications for
6a license shall be in writing and upon forms provided for this purpose by the division.
7An applicant at the time of making an application shall pay to the division a
8nonrefundable $300 fee for investigating the application and a $500 annual license
9fee for the period terminating on the last day of the current calendar year. If the cost
10of the investigation exceeds $300, the applicant shall upon demand of the division

1pay to the division the amount by which the cost of the investigation exceeds the
2nonrefundable fee.
SB99, s. 2 3Section 2. 138.09 (7) (bp) of the statutes is amended to read:
SB99,3,64 138.09 (7) (bp) A loan, whether precomputed or based upon the actuarial
5method, made after October 31, 1984, and prior to the effective date of this paragraph
6.... [LRB inserts date]
, is not subject to any maximum interest rate limit.
SB99, s. 3 7Section 3. 138.09 (7) (bs) of the statutes is created to read:
SB99,3,118 138.09 (7) (bs) 1. For purposes of this paragraph, "annual percentage rate"
9shall be determined consistent with the provisions of section 107 of the federal Truth
10in Lending Act, 15 USC 1606, and federal Regulation Z adopted under that act, 12
11CFR 226
.
SB99,3,1812 2. Notwithstanding sub. (9) (a) and ss. 138.05 (8) (c) and 422.201 (2) (bn) and
13(9), and except as provided in ss. 422.201 (10s) and (11), 422.202 (2m) (b), and 422.203
14(4) (c), a licensee may not charge, contract for, or receive an annual percentage rate
15of interest for a loan or forbearance made on or after the effective date of this
16subdivision .... [LRB inserts date], that is greater than 36 percent. This subdivision
17does not apply to an open-end credit plan or any consumer loan described in s.
18422.201 (12m).
SB99, s. 4 19Section 4. 138.14 (10) (a) 1. of the statutes is renumbered 138.14 (10) (a) 1r.
20and amended to read:
SB99,3,2421 138.14 (10) (a) 1r. Except as provided in Subject to subd. 2. and sub. (12) (b),
22this section imposes no limit on the interest that a licensee may not charge before the
23maturity date of
an annual percentage rate of interest greater than 36 percent on a
24payday loan.
SB99, s. 5 25Section 5. 138.14 (10) (a) 1g. of the statutes is created to read:
SB99,4,4
1138.14 (10) (a) 1g. For purposes of this paragraph, "annual percentage rate"
2shall be determined consistent with the provisions of section 107 of the federal Truth
3in Lending Act, 15 USC 1606, and federal Regulation Z adopted under that act, 12
4CFR 226
.
SB99, s. 6 5Section 6. 138.14 (13) (d) of the statutes is amended to read:
SB99,4,146 138.14 (13) (d) No payday loan, wherever made, for which a greater rate or
7amount of interest than is allowed under sub. (10) (a) 2. has been contracted for or
8received, may be enforced in this state, and every person in any way participating
9therein in this state shall be subject to this section. If a licensee makes an excessive
10charge of such interest as the result of an unintentional mistake, but upon demand
11makes correction of such mistake, the loan shall be enforceable and treated as if no
12violation occurred at the agreed rate. Nothing in this paragraph shall limit any
13greater rights or remedies afforded in chs. 421 to 427 to a customer in a consumer
14credit transaction.
SB99, s. 7 15Section 7. 422.201 (3) of the statutes is amended to read:
SB99,4,1916 422.201 (3) For Notwithstanding sub. (2), for licensees under s. 138.09 or
17138.14 or under ss. 218.0101 to 218.0163, the finance charge or rate of interest,
18calculated according to those sections, may not exceed the maximums permitted in
19ss. 138.09, 138.14, and 218.0101 to 218.0163, respectively.
SB99, s. 8 20Section 8. Nonstatutory provisions.
SB99,4,2221 (1) This act first applies to loans made, refinanced, or consolidated on the
22effective date of this subsection.
SB99, s. 9 23Section 9. Effective date.
SB99,5,2
1(1) This act takes effect on the first day of the 3rd month beginning after
2publication.
SB99,5,33 (End)
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