Convenience Lending
In 2007-2008 WIPPS helped conceive, organize, and implement a public scholarship program on convenience lending. The Institute convened a research team to investigate the “pay day” loan phenomenon in Wisconsin. A consortium of representatives from Get $mart Coalition of Wausau (a group of industry representatives from US Bank, River Valley Bank, Abby Bank, and many others); UW-Extension offices in Marathon, Milwaukee, and Racine Counties; Asset Builders of America, Inc., a non-profit financial education organization in Milwaukee; The League of Women Voters; Catholic Charities, The Wausau Daily Herald and the Post-Crescent; UW Colleges faculty members, and members of the Federal Reserve Bank undertook this year-long study, which was conducted in three phases. The problem that stakeholders sought to address was timely and of pressing public import, for not only was Wisconsin at a crossroads on the issue (with no state legislation to guide policy), there was also, at that time, no federal legislation dealing with convenience lending, despite the proliferation of payday loan stores (over 20,000 nationwide), most owned by a handful of very large corporate firms. Equally disturbing was the situation of approximately 5 million borrowers nationwide who were “trapped” into “rollover” lending situations that created $3-4 billion in debt yearly.
The stakeholders WIPPS assembled for this project included The United Way of Marathon County, whose LIFE report identified financial education and fiscal competency as one of the three pressing needs for citizens in the central Wisconsin area. Local education about convenience loan operations was identified as a community need, as storefront lenders were springing up all over the central Wisconsin community at more than 15 locations. Storefront lenders can not only negatively affect hard working low income families, but they also strain other community resources. George Waller, Assistant Professor of Political Science at the University of Wisconsin Fox Valley, identified a “broad public interest (in convenience loan education) here in Wisconsin and throughout the nation.” As a scholar, he also saw the need to fill the void of research on the topic, answering, “in a systematic and disciplined fashion, some important questions about the demographics of Wisconsin residents who use short-term convenience loan services, as well as the attitudinal and behavioral factors that are associated with the use of those lending institutions.” Waller noted this as a particularly timely and relevant project “given the current state of the nation’s financial sector and the troubled condition of the national economy” and affirmed this as “an interesting and useful project that should result in the collection of high quality qualitative and quantitative data for analysis and discussion at a vibrant and informative conference, which could serve as a model for continuing research into new and emerging patterns of economic and social behaviors.”
The first phase of this project investigated the background of the industry and practices nationally and in Wisconsin and included a field survey of convenience lending customers and interviews with industry owners and managers. WIPPS interns and UWMC students volunteered to conduct these surveys and interviews. The research phase produced a report for dissemination to the public, press, industry professionals, service-providers, and government leaders. The second phase of the project consisted of a series of statewide public dialogues (using the NIF/Kettering model) on the issues of consumer credit, debt, and lending practices and their impact on local communities. The third phase of the project consisted of a special convenience lending track as part of a broader statewide conference on wealth and poverty held in late spring of 2009 in Wausau. This track was specifically targeted to industry and service professionals and included a national speaker, a panel, and workshops designed to allow dialogue about best practices and discussion of possible future action plans regarding short term lending products.