Wisconsin Gov. Scott Walker has vetoed sections of the state budget that would have paved the way for a major expansion of payday lenders' authority.
In doing so he sided with many in the financial services industry who opposed the measure because, they said, it was too broad and ambiguous.
The legislation would have expanded the types of products and services payday lending companies could offer to include sales of insurance, annuities and "any financial or consumer financial services subject to regulation by statute or rule." It also would have allowed for payday lenders to enter certain nonfinancial lines of business.
The veto happened Sunday, a day before Walker officially announced his run for the Republican presidential nomination.
"The expanded scope of business provided for payday lenders is overly broad and significantly exceeds that of any other financial institutions," Walker wrote in his veto message attached to the budget. "In addition, the expanded scope could create regulatory ambiguity and consumer uncertainty."
In total Walker issued 104 vetoes to portions of the state budget. Requests for additional comment to Walker's office and his presidential campaign were not returned.
The payday lending provisions were passed by the state's Republican-led legislature in a quick motion as part of the state budget.
A group of five financial services trade organizations the Wisconsin Bankers Association, Wisconsin Credit Union League, Wisconsin Council of Life Insurers, Wisconsin Insurance Alliance and Wisconsin
Manufacturers & Commerce had sent a letter to Walker urging him to veto the provisions.
Mike Semmann, executive vice president and chief operations officer for the bankers association, said in an interview that his organization opposed the provisions because of their scope and vagueness.
They would put payday lenders "over and above any other financial institution," Semmann said, adding that it was unclear how the provision would have jibed with existing consumer statutes.
"It was the context of the way that it had happened combined with the expansive nature and the ambiguity that really caused us to take a hard and close look at how this would have an impact," Semmann said. "It was the sum of the parts that caught our attention."
The main backer of the bill according to the Milwaukee Journal Sentinel was Chicago-based PLS Financial Services, which did not return calls for comment. Previously, a spokesman for PLS told American Banker that the goal of the provisions was "to really update, modernize Wisconsin's statute, and bring it into line with other states."
Walker's veto did not fully close the door on future discussion about expanding the realm of payday lenders, perhaps a reflection of Walker's own previous support for the payday lending industry. In his veto message, Walker said, "Changes of this magnitude should be addressed as separate legislation where the implications can be more carefully explored."
The Wisconsin Credit Union League, in a statement following the veto, also advocated for the issue to be discussed as its own legislation.
"We strongly agree with Gov. Walker's assertion that legislation of this nature should be addressed as separate legislation where the implications can be carefully explored in a transparent and public fashion," said Tom Liebe, the league's senior vice president of advocacy.
Semmann, on the hand, said that a similarly worded, standalone bill also would be controversial although he declined to take a specific stance until he saw the language.
"A broad, expansive bill that was exactly like the budget language would generally be frowned upon by many businesses," he said.
Community groups had rallied against the provisions, too.
They would have given lenders access to "an unprecedented range of complex financial products" and would have allowed "abusive high-interest lenders to exploit particularly susceptible individuals by operating within casinos and liquor stores, or by directly operating such establishments themselves," according to a letter that Wisconsin Public Interest Research Group sent to the governor. A coalition of 30 groups including faith-based and public service organizations co-signed it.
"Vetoing these provisions was the only right thing to do for Wisconsin consumers and for a fair financial marketplace," Peter Skopec, director of Wisconsin PIRG, said Monday.