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Veto puts auto title lenders out of work in Wis.
Published: 05/20/2010
A few strokes of Gov. Jim Doyle's pen could put Sarah Lemanski out of work.
Lemanski said Wednesday she will lose her job as manager of a Loan Max store in Madison after Doyle used his partial veto power to ban auto title loans in Wisconsin starting Dec. 1.
The 24-year-old said she had just gotten a merit raise that bumped her salary to $35,000 a year after three years at the store. Her roughly 30 colleagues at the chain's 12 locations in Wisconsin could be put out of work, too.
"I don't think he actually considered the people employed with these companies," said Lemanski, who is pregnant and has "no idea" where she'll find work.
Industry representatives reacted angrily to the governor's unprecedented veto putting them out of business. But supporters hailed the move as a blow against predatory lending that will protect low-income families.
Fred Wade, a Madison lawyer and expert on Wisconsin's extraordinary partial veto power, said the maneuver was unprecedented in the state and likely the nation.
"In this instance, the governor is not only acting as a legislator but also as judge, jury and executioner for this particular industry," he said.
Wisconsin lawmakers passed a bill last month that put new regulations on auto title lenders allowing customers to take only one loan at a time and capping them to 50 percent of a car's value. The Assembly approved a measure to ban the loans, but that was stripped from the final version after the Senate objected amid an industry lobbying blitz.
Using the partial veto, Doyle revived the ban Tuesday by crossing out 33 words from a sentence in the bill. He left the first eight words, "No licensed lender may make a title loan" and the period at the end.
Doyle said loans guaranteed by a vehicle's title jeopardize "an asset that is essential to the well-being of working families." He said his decision to ban them is "going to be a big help for jobs."
"Hardworking people in low-income jobs end up losing their cars because of the auto title industry and as a result can't go to work," he said. Noting that the loans are banned in most states, he said, "It's hardly that I've done something that is so unusual."
Andy Gehl of the Legal Aid Society of Milwaukee said the ban will stop horror stories he routinely sees in which poor people lose their cars. One client borrowed $1,100 but ended up paying $4,600 over 19 months to satisfy the loan; another paid $160 a month for 10 months on a $400 loan.
"For a lot of people, their car is the most valuable thing they own and they can't afford to lose it," he said. "They just keep paying, hoping someday they find a way out of this. Eventually almost all of them will give up."
But Edward Heiser, a Milwaukee lawyer who has represented Wisconsin Auto Title Loans Inc., called the veto "an incredible antibusiness stroke of the pen" that blew up a compromise negotiated by lawmakers.
Supporters say the loans are a key source of cash for desperate, low-income people who cannot get bank loans. It is not clear how many lenders operate in Wisconsin or how many people they employ.
Ana Maria Rodriguez, 22, put her Nissan Infiniti up as collateral to get a $400 loan on Wednesday. She said she needed the money to buy medicine after suffering a seizure.
Rodriguez, a cashier at a Walmart store, said the loan was her only option until she can get a second job. Without the medicine, she worries she'll have a more serious seizure. The loan will cost her $414 if she pays it back within 30 days; $516 in 60 days at 300 percent annual interest.
Rodriguez said she worried banning the loans will take away "a place where people can get cash for an emergency" during an economic downturn.
Wade said the veto will give momentum to a proposed constitutional amendment approved by lawmakers last month that would curtail the governor's power to creatively rewrite spending bills approved by the legislature.
The amendment, which still needs approval again by lawmakers during their next session and from voters in a statewide referendum, would require governors to cross out entire sections of bills. Eliminating individual words to create new sentences, as Doyle did, would not be allowed.
Sen. Glenn Grothman, R-West Bend, said he was happy "these out-of-state businesses are not going to be ripping off the mathematically illiterate any longer."
"The question," he said, "is whether the ends justify the means."
