RJM:wlj:jf
2001 - 2002 LEGISLATURE
March 30, 2001 - Introduced by Representatives Hoven, Albers, Berceau, Boyle,
Gunderson, Hahn, Kestell, Krawczyk, Ladwig, Leibham, Musser, Ott,
Owens, Petrowski, Powers, Seratti, Stone, Townsend, Vrakas
and
Wasserman, cosponsored by Senators George, Baumgart, Darling, Roessler
and Rosenzweig. Referred to Committee on Financial Institutions.
AB266,1,2 1An Act to create 138.14 of the statutes; relating to: payday loan providers and
2granting rule-making authority.
Analysis by the Legislative Reference Bureau
Currently, state and federal law contain numerous provisions regulating
consumer loans (generally, loans of $25,000 or less made to individuals for personal,
family, or household purposes). For example, under current law, the creditor must
provide the borrower under the consumer loan with certain information before the
loan is consummated. Among other things, the creditor must disclose the total
amount financed in the transaction, the amount of the finance charge assessed in the
transaction, and the cost of the credit calculated as a yearly rate. The creditor must
also provide the borrower with a notice that encourages the borrower to examine the
loan documentation and that advises the borrower of certain rights.
This bill creates additional notice requirements that specifically apply to
payday loans. In a typical payday loan transaction, the creditor accepts a personal
check from the borrower, pays the borrower the amount of the check less any
applicable finance charge, and agrees to wait a short time, such as two weeks, before
depositing the check. Under this bill, before disbursing funds pursuant to a payday
loan, the payday loan provider must provide the borrower with a notice that
compares the cost of the payday loan if it is paid in full when due with the cost of the
payday loan if it is paid in full after being refinanced eight times. Furthermore, the
payday loan provider must notify the borrower that a payday loan is not intended to
meet long-term financial needs, that a payday loan should be used only in a financial
emergency, that the borrower will be required to pay additional fees if the payday

loan is not paid in full when due, and that refinancing the payday loan, or entering
into consecutive payday loans to pay an existing payday loan, may cause financial
hardship.
This bill also requires the payday loan provider to notify the borrower that the
borrower may cancel the payday loan at any time before receiving the loan funds.
In addition, the payday loan provider must provide the borrower with materials,
obtained from the department of financial institutions, that inform the borrower of
the potential costs of entering into a payday loan and of other options for borrowing
funds that may be available.
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:
AB266, s. 1 1Section 1. 138.14 of the statutes is created to read:
AB266,2,2 2138.14 Payday loan providers. (1) Definitions. In this section:
AB266,2,43 (a) "Applicant" means an individual who obtains or seeks to obtain a payday
4loan.
AB266,2,55 (b) "Check" has the meaning given in s. 403.104 (6).
AB266,2,66 (c) "Department" means the department of financial institutions.
AB266,2,97 (d) "Financial establishment" means any organization that is authorized to do
8business under state or federal law and that holds a demand deposit, savings deposit,
9or other asset account belonging to an individual.
AB266,2,1010 (e) "Organization" has the meaning given in s. 19.42 (11).
AB266,2,1111 (f) "Payday loan" means any of the following:
AB266,3,212 1. A transaction between an individual with an account at a financial
13establishment and another person, in which the person agrees to accept from the
14individual a check that draws on the account, to hold the check for a period of time
15before negotiating or presenting the check for payment, and to pay to the individual,

1at any time before negotiating or presenting the check for payment, an amount that
2is agreed to by the individual.
AB266,3,83 2. A transaction between an individual with an account at a financial
4establishment and another person, in which the person agrees to accept the
5individual's authorization to initiate an electronic fund transfer from the account, to
6wait for a period of time before initiating the electronic fund transfer, and to pay to
7the individual, at any time before initiating the electronic fund transfer, an amount
8that is agreed to by the individual.
AB266,3,109 (g) "Payday loan provider" means a person who is required to be licensed under
10s. 138.09 and who makes payday loans in the ordinary course of business.
AB266,3,12 11(2) Disclosure requirements. Before disbursing funds pursuant to a payday
12loan, a payday loan provider shall provide all of the following to the applicant:
AB266,3,1413 (a) A clear and conspicuous printed or typewritten notice indicating all of the
14following:
AB266,3,1515 1. That a payday loan is not intended to meet long-term financial needs.
AB266,3,1716 2. That an applicant should use a payday loan only to provide funds in a
17financial emergency.
AB266,3,1918 3. That the applicant will be required to pay additional fees if the loan is
19refinanced rather than paid in full when due.
AB266,3,2120 4. That refinancing a payday loan or entering into consecutive payday loans to
21pay an existing payday loan may cause financial hardship for the applicant.
AB266,4,222 (b) A clear and conspicuous printed or typewritten notice comparing the cost
23to the applicant if the applicant pays the payday loan in full at the end of the loan
24term with the cost to the applicant if the applicant pays the payday loan in full after

1financing the amount of the payday loan at the end of the loan term 8 consecutive
2times.
AB266,4,53 (c) A clear and conspicuous printed or typewritten notice that the applicant
4may cancel the transaction, at no cost to the applicant, at any time before receiving
5the funds pursuant to the payday loan.
AB266,4,66 (d) Educational materials provided by the department under sub. (4).
AB266,4,10 7(3) Posting requirement. A payday loan provider shall post a copy of each
8notice required under sub. (2) (a) and (c) in a conspicuous location at each place
9where, in the ordinary course of business, an applicant signs a contract for a payday
10loan.
AB266,4,16 11(4) Administration. (a) The department shall promulgate rules and prescribe
12forms to ensure the efficient administration of this section. The rules shall include
13a method for calculating the amounts required to be disclosed under sub. (2) (b). In
14addition, the department shall develop educational materials to inform an applicant
15of the potential costs of entering into a payday loan and of other options for borrowing
16funds that may be available to the applicant.
AB266,4,2017 (b) Upon the request of a payday loan provider, the department shall supply
18the payday loan provider with copies of the educational materials developed under
19par. (a). The department may charge a payday loan provider a reasonable fee for
20educational materials supplied under this subsection.
AB266, s. 2 21Section 2. Nonstatutory provisions.
AB266,5,222 (1) Submission of proposed rules governing payday loan providers. No later
23than the first day of the 6th month beginning after publication, the department of
24financial institutions shall submit in proposed form the rules governing payday loan

1providers under section 138.14 (4) of the statutes, as created by this act, to the
2legislative council staff under section 227.15 (1) of the statutes.
AB266, s. 3 3Section 3 . Initial applicability.
AB266,5,54 (1) The creation of section 138.14 of the statutes first applies to payday loans
5made on the effective date of this subsection.
AB266, s. 4 6Section 4. Effective date.
AB266,5,87 (1) The creation of section 138.14 of the statutes and Section 3 (1 ) of this act
8take effect on the first day of the 12th month beginning after publication.
AB266,5,99 (End)
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