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Here at PolitiFact Wisconsin, we rarely see terms as provocative and pungent as "usurious vipers."
When we do, we want to know more.
In this case, it was Wisconsin state Sen. Glenn Grothman (R-West Bend) who referred to snakes charging exorbitant interest rates in recent comments about payday lenders.
Payday loan operations -- such as Check ’n Go, Payday Loan Store and Check-Cash Advance -- make short-term loans. You sign a loan agreement, write a post-dated check and get your money. The lender holds off on cashing your check until your next payday, typically two weeks.
Interest rates can run high.
Wisconsin has 482 payday lenders; West Bend, according to Grothman, has eight of them.
Grothman, who opposes such operations, made his snakes remark in response to news that payday lenders are planning a push to roll back regulations on their business set to take effect in Wisconsin on Jan. 1, 2011.
"This industry does not exist in a state like Minnesota, and I don't see any downside in keeping these usurious vipers out of our state," said Grothman, the Senate’s new assistant majority leader, in a Nov. 13, 2010 Milwaukee Journal Sentinel article. "There are so many legitimate businesses in this state that need regulatory help. I sure hope that these guys are not on the list."
Grothman made a similar comment about the lack of payday lenders in Minnesota in April 2010 during a discussion among Wisconsin lawmakers about the bill that eventually became law.
So, is it true that Minnesota has driven all payday lenders out of the state?
When asked about the source for his comment, Grothman acknowledged he didn’t know for sure if his statement was true, but said he had heard from a couple of people that Minnesota doesn’t have payday lenders.
Not wanting to appear like a snake in the grass, we told Grothman we’d do some, ahem, checking.
It didn’t take long.
It turns out Minnesota does allow payday lenders, some 75 of them, according to the state Department of Commerce.
The state’s attorney general warns consumers about "hefty" finance charges that can apply to their loans and spells out some of the restrictions that are in place.
For loans of up to $350, a sliding scale applies that limits the interest rate to 10 percent plus a $5 fee. For loans between $350 and $1,000, the lender cannot charge more than 33 percent interest plus a $25 fee.
Wisconsin also warns its citizens about them.
The state Department of Financial Institutions says interest on payday loans can reach 500 percent per year or more. Borrowing $200 at 500 percent interest for two weeks costs $38.36 and; if the loan remains outstanding for 10 weeks, the cost -- $191.78 -- is nearly as much as the loan itself, according to the state.
The Wisconsin law that takes effect in January makes a number of changes, including limiting payday loans to $1,500. In an effort to keep consumers from accumulating too much debt, the law also limits the loans to being renewed one time.
The Wisconsin Deferred Deposit Association, which represents payday lenders, has said it will push to soften Wisconsin’s new regulations, although it has not been specific about what changes it will seek.
According to the association, the average payday loan in Wisconsin is for $300, with a fee of $45.
There actually are many states, nearly a third of them -- including Ohio and most of the East Coast -- that don’t have payday lenders, according to the Center for Responsible Lending.
But as we’ve pointed out, Minnesota isn’t one of them.
That means it’s time for the Truth-O-Meter.
State Sen. Glenn Grothman said Wisconsin’s neighbor to the west doesn’t have any payday lenders. He apparently thought it was true and was trying to make a point that Wisconsin shouldn’t make it any easier for those businesses to operate.
We wouldn’t say Grothman was being snaky. But his statement is False.
Center for Responsible Lending, Map of U.S. payday stores per household, Nov. 1, 2010
Center for Responsible Lending, The cost of bad lending in Wisconsin, August 2010
E-mail interview, Mike Mach of Wisconsin Department of Financial Institutions, Nov. 23, 2010
E-mail interview, Minnesota Department of Commerce spokesman Nicole Garrison-Sprenger, Nov. 23, 2010
Milwaukee Journal Sentinel, Payday loan industry hopes state will loosen rules, Nov. 13, 2010
Minnesota Attorney General Lori Swanson, Beware of payday loans
Wisconsin Deferred Deposit Association, About us
Wisconsin Deferred Deposit Association, What is a short-term loan?
Wisconsin Deferred Deposit Association, Myth vs. facts
Wisconsin Department of Financial Institutions, Payday loans
Wisconsin Legislative Reference Bureau, Payday loans -- 2009 Wisconsin Act 405, November 2010
Email and phone interview, state Sen. Glenn Grothman, R-West Bend, Nov. 22, 2010
Wispolitics.com, Debate begins on payday lender bill, April 13, 2010
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