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Payday loan interest cap clears both chambers

Friday, Jan 15, 2021

* Catching up on some stuff today. Here’s a Wednesday press release

The Illinois General Assembly passed the Predatory Loan Prevention Act today, which will implement a 36 percent interest rate cap on consumer loans, including payday and car title loans. The legislation, SB1792, which passed with a bipartisan vote in both chambers, was filed as part of the Illinois Legislative Black Caucus’ economic equity omnibus bill, and was sponsored by Rep. Sonya Harper and Sen. Chris Belt. Senator Jacqueline Collins, chair of the Senate Financial Institutions, spearheaded the broad coalition that supported the measure.

In Illinois, the average annual percentage rate (APR) on a payday loan is 297 percent, and the average APR on an auto title loan is 179 percent. Federal law already protects active-duty military with a 36 percent APR cap. This bill would extend the same protection to Illinois veterans and all other consumers. Seventeen states plus the District of Columbia have 36 percent caps or lower.

A coalition of more than 50 consumer, faith, labor, community and civil rights organizations, along with financial institutions, Secretary of State Jesse White, Treasurer Michael Frerichs, Cook County Board President Toni Preckwinkle, an and the Offices of the Illinois Treasurer and Secretary of State, support the legislation (full list at bottom).

* Hyde Park Herald

Another economic equity bill, SB 1480, caps interest rates on payday and car title loans and to limit the use of criminal history records as a basis for employment and housing decisions. Peters, Tarver and Buckner voted for it.

Peters said the bill limits payday lenders ability to charge interest rates to 36%, down from more than 300%.

“We would love it to be a lot smaller,” he said. “But the payday loan industry tried to send down an army of people to start (Sen.) Jackie Collins (D-16th) from getting that done, and what we knew was if you put that bill on the board, most people aren’t voting against it. You know you’d get more than 30 in the Senate, because you don’t want it to say for you politically that you stood in the way of payday loan reform.”

* Tribune

A measure that caps the annual percentage rate lenders can place on the unpaid balance of a payday loan at 36% and calls for disparity studies for certain industries received broad, bipartisan support in the House.

“These payday loan lenders need to be under strict, strict regulation,” said Rep. Andrew Chesney, a Republican from Freeport. “They prey on our communities, I would argue they’re a detriment to our communities.”

* WTTW

One provision of the Black Caucus’ extensive agenda limits the interest payday loan providers can charge to 36%.

“How many of you want to get a credit card from Macy’s or Neiman Marcus at 80%, 99% — this is preying on certain communities. It’s really targeting. … It’s a remake, rebirth of redlining, housing covenants and all the other ills and hells that decimated my community,” said Sen. Jacqueline Collins (D-Chicago). “And what we’re trying to do is ensure that they have an opportunity to build economic stability.”

That measure passed despite critics saying it’ll leave low-income individuals without any access to capital.

“There are many citizens – not just in Illinois but all across the country who don’t necessarily have the credit rating that would necessarily allow them to go to the company, lending institutions and borrow money, but nevertheless have a cash need or capital need, maybe short term or to put a new roof on their house or repair a car,” Sen. Dale Righter (R-Mattoon) said.

* Center Square

The legislation also included an interest cap on payday loans, diversity requirements in state contracting and purchasing and the removal of lead water pipes in public water systems.

“This pillar is part of the Black Caucus’ agenda to end systemic racism,” Harper said. “In this pillar, we are addressing several different areas such as banking and investment, economic mobility, small business and entrepreneurship, procurement and the Business Enterprise Program, industry-specific equity, housing, land-use gentrification, and pay equity and worker’s rights.”

Republican state Rep. Deanne Mazzochi said there were too many details left out of the legislation which could lead to future legal issues.

“I am an attorney. I deal with this kind of stuff all the time in terms of loose language and legislative statutes, and I will tell you they can lead to very unjust results,” Mazzochi said.

- Posted by Rich Miller        

22 Comments
  1. - jimbo - Friday, Jan 15, 21 @ 1:00 pm:

    Finally. I first became aware of these business in the mid 90’s during an advertising campaign. How these legalized loan sharks survived all these years is sad.


  2. - DuPage Saint - Friday, Jan 15, 21 @ 1:00 pm:

    36 per cent. Wow. I think we need that state or county bank that I heard about to make loans.


  3. - OneMan - Friday, Jan 15, 21 @ 1:01 pm:

    Got called (by an actual operator) about this and ‘preventing people who need them from getting loans’ asked the called if it was the payday loan industry. He didn’t know and asked a co-worker and then said it was.

    Thanked him for calling and hung up.


  4. - TheUpperRoom - Friday, Jan 15, 21 @ 1:07 pm:

    Thank goodness. I’m all for personal accountability, but these payday loan places are scam artists. Some of the tactics they use - like never sending a first statement until past the due date - should be crimes.


  5. - cover - Friday, Jan 15, 21 @ 1:12 pm:

    Loan sharks of all stripes are not a new thing. Remember the lyric “easy credit rip-offs” in the theme song to Good Times, nearly 50 years ago. Showing my age, I guess…


  6. - Three Dimensional Checkers - Friday, Jan 15, 21 @ 1:17 pm:

    This is a good reason not to morn Madigan’s exit much. No coincidences here.


  7. - Been There - Friday, Jan 15, 21 @ 1:23 pm:

    ==== The legislation also included an interest cap on payday loans, diversity requirements in state contracting and purchasing and the removal of lead water pipes in public water systems.=====

    I though the lead line removal language was removed?
    From the summary of the bill
    ——Removes the Lead Service Line Replacement and Notification Act provisions. ——

    Or is there still some language and it was dumbed down? (Sorry I’m not at my laptop and haven’t had time to pull up the Bill)


  8. - 1st Ward - Friday, Jan 15, 21 @ 1:23 pm:

    “36 per cent. Wow. I think we need that state or county bank that I heard about to make loans.”

    36% sounds like alot but when you are lending ~$1K per loan and paying employees $50K+ + benefits you need to do a lot of loans (and actually collect) if each loan is only generating ~$360 in interest and fees. If you advocate for a Public Bank how much higher should property taxes go? If you ban or make the industry unprofitable people that are desperate enough to seek these out are now SOL. I’m not at all advocating for the industry as there are plenty of slimy people in it but there can be negative consequences to legislation like this that need to be properly thought out. If the payday lenders can automate their services that will help but again the clientele they are serving might/likely doesn’t have reliable technology/internet to begin with.


  9. - Captain Obvious - Friday, Jan 15, 21 @ 1:34 pm:

    Even 36% sounds pretty high, don’t you think? I know these are high risk loans but if you can’t make your nut at 36% maybe find a different business. It always surprises me how willing some folks are to prey on their fellow man.


  10. - PublicServant - Friday, Jan 15, 21 @ 1:39 pm:

    Mazzochi, I see, trying to spread FUD about a great bill.

    === …loose language and legislative statutes, and I will tell you they can lead to very unjust results ===

    Unspecified, unjust results in “the future”. Gotta try harder, Ms. Mazzochi, you’re starting to sound like Giuliani.


  11. - Anyone Remember - Friday, Jan 15, 21 @ 1:40 pm:

    Jimbo -
    Reagan era laws obliterated state interest rate caps, and a whole lot of other state consumer laws For example, New York state law allowed people to rent cars without credit cards using cash. Reagan era legislation obliterated that, and although that law is now back in effect, the car rental company can “screen” you (a process that can take upwards of a week).


  12. - Ignatius - Friday, Jan 15, 21 @ 1:44 pm:

    36% is very high, but much better than 297%. The Democratic controlled legislature could have taken care of this years ago except MJM would not let it happen.


  13. - Southsider - Friday, Jan 15, 21 @ 1:52 pm:

    A lot of the language in the Black Caucus bills seems lacking clarity and specificity. Although, I admire the addition of so many hyphens…smh. Staff needs to get their act together.


  14. - walker - Friday, Jan 15, 21 @ 2:01 pm:

    @Anyone Remember
    Indeed: 36% was the ceiling generally used across the states until Reagan killed all such consumer protections.
    Anyone who tells us that the associated risk justifies a 300% rate must think us complete fools.
    The “Illinois CRA” creates potential for needed reforms.
    A lot of long-overdue pieces in the Black Caucus economic pillar.


  15. - Brent A - Friday, Jan 15, 21 @ 2:07 pm:

    “Anyone Remember” nailed it. Until 1985, it was a felony in Illinois to make a loan exceeding 20% interest. It’s called criminal usury. The law was changed to let companies exceed the rate if they got a license. In other words, a far more affordable rate applies to loan sharks than applies to Illinois-licensed finance companies.


  16. - walker - Friday, Jan 15, 21 @ 2:08 pm:

    Triggered another recollection:
    New York Mayor Rudi Giuliani argued that removing the usury ceiling on payday loans would be a tool to drive the New York mob out of business thru competition.


  17. - walker - Friday, Jan 15, 21 @ 2:11 pm:

    (When Rudi was US Attorney)


  18. - Been There - Friday, Jan 15, 21 @ 2:16 pm:

    ======== The legislation also included an interest cap on payday loans, diversity requirements in state contracting and purchasing and the removal of lead water pipes in public water systems.=====

    So Center Square statement about the lead line removal is wrong. Those provisions were taken out in amendment 4. They had me worried that I told my client the wrong info.


  19. - About time - Friday, Jan 15, 21 @ 2:45 pm:

    Some car title lenders in chicago area charge 300-400% interest ..while holding title to your car…Good for this cap ..Wonder if 36% limit applies to out of state ,high priced interest charges ..on online loans


  20. - Essential State Employee - Friday, Jan 15, 21 @ 3:20 pm:

    Maybe losing a few extra of those payday/title loan places will clean up South MacArthur Blvd in Springfield a little more.

    Then again, if those places go away their buildings will most likely just sit abandoned and rot away (e.g., the old McDonald’s that closed in early 2017 which used to have the old 50s-era Arch McDs sign until around 2008).


  21. - Amalia - Friday, Jan 15, 21 @ 3:29 pm:

    This issue around so long Obama worked on it here.


  22. - Jim Boofalo - Tuesday, Jan 26, 21 @ 11:30 am:

    If you borrow $2,500 over a term of 1 year with an APR of 10% and a fee of 3%, you will pay $219,79 each month. The total amount payable will be of $2,637, with total interest of $137,48.

    https://fundsjoy.com/?aid=7447


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