The Wisconsin Collectors Association is supporting a change to a state law that would raise interest rates for consumers who default on their debts.

The proposed hike in the default interest rate only would affect debts of up to $10,000. The effort is designed to ease a change in law that occurred in 2011, when state lawmakers lowered the rate on all default debts from 12 percent to one percent, plus the prime rate.  

WCA believe the lower interest rates actually have encouraged people to not pay what they owe to small businesses and hospitals that collection agencies work with, Tina Hanson, president of the association, told Wisconsin Public Radio.  

"What this is hurting is the plumber down the street," she said. "This is hurting your roofer and your local grocery store. These are the people that are being affected by this, because there's no incentive for the consumer to pay back these bills."

Backers of the bill, however, are concerned there aren't enough votes in the state Senate to approve raising the interest rate across the board.

The bill's critics argue it discriminates against low income consumers who often can't afford an attorney to defend themselves against a creditor in small claims court. The increased rate should apply equally to larger debts and to personal injury claims made by consumers against corporations, says Chris Stombaugh of the Wisconsin Association for Justice.

"Every Wisconsinite should be treated alike, whether you are a person who owns a collection agency or a person who's been injured. It's really just about fairness," Stombaugh said, in the Wisconsin Public Radio report.

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