2003 ASSEMBLY BILL 665

November 13, 2003 - Introduced by Representatives Jeskewitz, M. Lehman, Musser, Boyle, Taylor, Owens, Ziegelbauer, Hahn, Gronemus, Olsen, Plouff, Van Roy, Gielow, Berceau, Ott, Gunderson and Powers, cosponsored by Senators Schultz and Stepp. Referred to Committee on Financial Institutions.

Analysis by the Legislative Reference Bureau Pg1Ln1 An Act to create 138.09 (8) (f) and 138.14 of the statutes; relating to: payday
Pg1Ln2 loan providers and granting rule-making authority.
This bill creates additional notice requirements that specifically apply to
payday loans made by these licensed lenders. 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 of less than $15,000 with a term of at
least three days but not more than 31 days, 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
three 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. current law does not regulate the total finance charges that may be assessed on a
consumer transaction, although current law does require certain persons who desire
to assess a finance charge in excess of 18% per year to obtain a license from the
Division of Banking in the Department of Financial Institutions. 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. Generally,
Section 1. 138.09 (8) (f) of the statutes is created to read:
Pg2Ln2 138.09 (8) (f) When making a payday loan, as defined in s. 138.14 (1) (f), comply
Pg2Ln3 with s. 138.14 (2) and (3) and rules promulgated under s. 138.14 (4).
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.

This bill also requires the payday loan provider to notify the borrower that the
borrower may cancel such a 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.
138.14 Payday loan providers. (1) Definitions. In this section:
Pg2Ln6 (a) "Applicant" means an individual who obtains or seeks to obtain a payday
Pg2Ln7 loan.
(b) "Check" has the meaning given in s. 403.104 (6).
(c) "Department" means the department of financial institutions.
(d) "Financial establishment" means any organization that is authorized to do
Pg2Ln11 business under state or federal law and that holds a demand deposit, savings deposit,
Pg2Ln12 or other asset account belonging to an individual.
(e) "Organization" has the meaning given in s. 19.42 (11).
(f) "Payday loan" means any of the following:
1. A transaction between an individual with an account at a financial
Pg3Ln3 establishment and another person, in which the person agrees to accept from the
Pg3Ln4 individual a check that draws less than $15,000 on the account, to hold the check for
Pg3Ln5 at least 3 days but not more than 31 days before negotiating or presenting the check
Pg3Ln6 for payment, and to pay to the individual, at any time before negotiating or
Pg3Ln7 presenting the check for payment, an amount that is agreed to by the individual.
2. A transaction between an individual with an account at a financial

establishment and another person, in which the person agrees to accept the
Pg3Ln10 individual's authorization to initiate an electronic fund transfer of less than $15,000
Pg3Ln11 from the account, to wait for at least 3 days but not more than 31 days before
Pg3Ln12 initiating the electronic fund transfer, and to pay to the individual, at any time before
Pg3Ln13 initiating the electronic fund transfer, an amount that is agreed to by the individual.
(g) "Payday loan provider" means a person who is required to be licensed under
Pg3Ln15 s. 138.09 and who makes payday loans.
(2) Disclosure requirements. Before disbursing funds pursuant to a payday
Pg3Ln17 loan, a payday loan provider shall provide all of the following to the applicant:
(a) A clear and conspicuous printed or typewritten notice indicating all of the
Pg3Ln19 following:
1. That a payday loan is not intended to meet long-term financial needs.
2. That an applicant should use a payday loan only to provide funds in a
Pg3Ln22 financial emergency.
3. That the applicant will be required to pay additional interest if the loan is
Pg3Ln24 refinanced rather than paid in full when due.
4. That refinancing a payday loan or entering into consecutive payday loans to
Pg4Ln2 pay an existing payday loan may cause financial hardship for the applicant.
(b) A clear and conspicuous printed or typewritten notice comparing the cost
Pg4Ln4 to the applicant if the applicant pays the payday loan in full at the end of the loan
Pg4Ln5 term with the cost to the applicant if the applicant pays the payday loan in full after
Pg4Ln6 financing the amount of the payday loan at the end of the loan term 3 consecutive
Pg4Ln7 times.
(c) A clear and conspicuous printed or typewritten notice that the applicant
Pg4Ln9 may cancel the transaction, at no cost to the applicant, at any time before receiving
Pg4Ln10 the funds pursuant to the payday loan.
(d) A copy of the educational materials prescribed by the department under
Pg4Ln12 sub. (4).
(3) Posting requirement. A payday loan provider shall post a copy of each
Pg4Ln14 notice required under sub. (2) (a) and (c) in a conspicuous location at each place
Pg4Ln15 where, in the ordinary course of business, an applicant signs a contract for a payday
Pg4Ln16 loan.
(4) Administration. The department shall promulgate rules to ensure the
Pg4Ln18 efficient administration of this section. The rules shall include a method for
Pg4Ln19 calculating the amounts required to be disclosed under sub. (2) (b). In addition, the
Pg4Ln20 rules shall prescribe the form and content of educational materials designed to
Pg4Ln21 inform an applicant of the potential costs of entering into a payday loan and of other
Pg4Ln22 options for borrowing funds that may be available to the applicant.
Section 3. Nonstatutory provisions.
(1) Submission of proposed rules governing payday loan providers. No later
Pg4Ln25 than the first day of the 6th month beginning after publication, the department of
Pg5Ln1 financial institutions shall submit in proposed form the rules governing payday loan
Pg5Ln2 providers under section 138.14 (4) of the statutes, as created by this act, to the
Pg5Ln3 legislative council staff under section 227.15 (1) of the statutes.
Section 4. Initial applicability.
(1) The creation of section 138.14 of the statutes first applies to payday loans
Pg5Ln6 made on the effective date of this subsection.
Section 5. Effective date.
(1) The creation of section 138.14 of the statutes and Section 4 (1) of this act
Pg5Ln9 take effect on the first day of the 12th month beginning after publication.
2003 - 2004 LEGISLATURE
2003 SENATE BILL 338
December 3, 2003 - Introduced by Senators Schultz and Stepp, cosponsored by Representatives Jeskewitz, M. Lehman, Musser, Boyle, Taylor, Owens, Ziegelbauer, Hahn, Gronemus, Olsen, Plouff, Van Roy, Gielow, Berceau, Ott, Gunderson and Powers. Referred to Committee on Agriculture, Financial Institutions and Insurance.
An Act to create 138.09 (8) (f) and 138.14 of the statutes; relating to: payday
Pg1Ln2 loan providers and granting rule-making authority.

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. Generally,
current law does not regulate the total finance charges that may be assessed on a
consumer transaction, although current law does require certain persons who desire
to assess a finance charge in excess of 18% per year to obtain a license from the
Division of Banking in the Department of Financial Institutions.
This bill creates additional notice requirements that specifically apply to
payday loans made by these licensed lenders. 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 of less than $15,000 with a term of at
least three days but not more than 31 days, 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
three 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 such a 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:
Section 1. 138.09 (8) (f) of the statutes is created to read:
138.09 (8) (f) When making a payday loan, as defined in s. 138.14 (1) (f), comply
Pg2Ln3 with s. 138.14 (2) and (3) and rules promulgated under s. 138.14 (4).
Section 2. 138.14 of the statutes is created to read:
138.14 Payday loan providers. (1) Definitions. In this section:
(a) "Applicant" means an individual who obtains or seeks to obtain a payday
Pg2Ln7 loan.
(b) "Check" has the meaning given in s. 403.104 (6).
(c) "Department" means the department of financial institutions.
(d) "Financial establishment" means any organization that is authorized to do
Pg2Ln11 business under state or federal law and that holds a demand deposit, savings deposit,
Pg2Ln12 or other asset account belonging to an individual.
(e) "Organization" has the meaning given in s. 19.42 (11).
(f) "Payday loan" means any of the following:
1. A transaction between an individual with an account at a financial
Pg3Ln3 establishment and another person, in which the person agrees to accept from the
Pg3Ln4 individual a check that draws less than $15,000 on the account, to hold the check for
Pg3Ln5 at least 3 days but not more than 31 days before negotiating or presenting the check
for payment, and to pay to the individual, at any time before negotiating or
Pg3Ln7 presenting the check for payment, an amount that is agreed to by the individual.
2. A transaction between an individual with an account at a financial
Pg3Ln9 establishment and another person, in which the person agrees to accept the
Pg3Ln10 individual's authorization to initiate an electronic fund transfer of less than $15,000
Pg3Ln11 from the account, to wait for at least 3 days but not more than 31 days before
Pg3Ln12 initiating the electronic fund transfer, and to pay to the individual, at any time before
Pg3Ln13 initiating the electronic fund transfer, an amount that is agreed to by the individual.
(g) "Payday loan provider" means a person who is required to be licensed under
Pg3Ln15 s. 138.09 and who makes payday loans.
(2) Disclosure requirements. Before disbursing funds pursuant to a payday
Pg3Ln17 loan, a payday loan provider shall provide all of the following to the applicant:
(a) A clear and conspicuous printed or typewritten notice indicating all of the
Pg3Ln19 following:
1. That a payday loan is not intended to meet long-term financial needs.
2. That an applicant should use a payday loan only to provide funds in a
Pg3Ln22 financial emergency.
3. That the applicant will be required to pay additional interest if the loan is
Pg3Ln24 refinanced rather than paid in full when due.
4. That refinancing a payday loan or entering into consecutive payday loans to
Pg4Ln2 pay an existing payday loan may cause financial hardship for the applicant.
(b) A clear and conspicuous printed or typewritten notice comparing the cost
Pg4Ln4 to the applicant if the applicant pays the payday loan in full at the end of the loan
Pg4Ln5 term with the cost to the applicant if the applicant pays the payday loan in full after
Pg4Ln6 financing the amount of the payday loan at the end of the loan term 3 consecutive
Pg4Ln7 times.
(c) A clear and conspicuous printed or typewritten notice that the applicant
Pg4Ln9 may cancel the transaction, at no cost to the applicant, at any time before receiving
Pg4Ln10 the funds pursuant to the payday loan.
(d) A copy of the educational materials prescribed by the department under
Pg4Ln12 sub. (4).
(3) Posting requirement. A payday loan provider shall post a copy of each
Pg4Ln14 notice required under sub. (2) (a) and (c) in a conspicuous location at each place
Pg4Ln15 where, in the ordinary course of business, an applicant signs a contract for a payday
Pg4Ln16 loan. (4) Administration. The department shall promulgate rules to ensure the
Pg4Ln18 efficient administration of this section. The rules shall include a method for
Pg4Ln19 calculating the amounts required to be disclosed under sub. (2) (b). In addition, the
Pg4Ln20 rules shall prescribe the form and content of educational materials designed to
Pg4Ln21 inform an applicant of the potential costs of entering into a payday loan and of other
Pg4Ln22 options for borrowing funds that may be available to the applicant.
Section 3. Nonstatutory provisions.
(1) Submission of proposed rules governing payday loan providers. No later
Pg4Ln25 than the first day of the 6th month beginning after publication, the department of
Pg5Ln1 financial institutions shall submit in proposed form the rules governing payday loan
Pg5Ln2 providers under section 138.14 (4) of the statutes, as created by this act, to the
Pg5Ln3 legislative council staff under section 227.15 (1) of the statutes.
Section 4. Initial applicability.
(1) The creation of section 138.14 of the statutes first applies to payday loans
Pg5Ln6 made on the effective date of this subsection.
Section 5. Effective date.
(1) The creation of section 138.14 of the statutes and Section 4 (1) of this act
Pg5Ln9 take effect on the first day of the 12th month beginning after publication.

Under current law, a lender other than a bank, savings bank, savings and loan
association, or credit union generally must obtain a license from the division of
banking in the Department of Financial Institutions (DFI) to assess a finance charge
greater than 18%. This type of lender is generally referred to as a "licensed lender."
With certain limited exceptions, current law provides no maximum finance charge
for a loan entered into by a licensed lender.
Currently, a lender who makes payday loans is typically required to be a
licensed lender. In a standard payday loan transaction, the lender 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. Current law does not specifically regulate payday loan
transactions.

This bill creates requirements and prohibitions that apply specifically to
payday loan transactions. Under this bill, a lender, other than a bank, saving bank,
savings and loan association, or credit union, who makes payday loans in the regular
course of business (payday loan provider), may not assess fees or interest in a payday
loan transaction in an aggregate amount that exceeds 5% of the amount of the
payday loan. In addition, a payday loan provider may not make a payday loan with
a term of less than 30 days. The bill also requires a payday loan provider to give each
borrower copies of educational brochures prepared by DFI regarding the operation
and potential costs of payday loans, to make annual reports to the division of banking
in DFI, and to pay annually any reasonable filing fee imposed by the division of
banking in DFI.

For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.