Bill would protect consumers from unlicensed online payday lenders

Written by Monsignor John Egan Campaign for Payday Loan Reform on January 31, 2012 - 8:46pm

Illinois has made significant advances in protecting consumers from high-cost, short-term loans like payday and consumer installment loans, but more and more loans are originated online where  state consumer protections are too often ignored.  A bill introduced by Illinois Rep. Greg Harris would tackle the problem of unlicensed payday lenders, which generally operate online, by eliminating an unlicensed lender’s ability to collect on illegally-arranged loans.


HB3935 amends the Payday Loan Reform Act and the Consumer Installment Loan Act to prohibit lenders that illegally make loans to borrowers in Illinois from collecting any portion of an outstanding loan.  The bill protects consumers trapped in loans originated by unlicensed lenders by ensuring that lenders cannot collect principal, interest, or any additional fees in the court system, or through any prearranged payment agreement.  Currently, the only remedy to unlicensed lending is a cease and desist order issued by the Illinois Department of Financial and Professional Regulation.


Online payday loans:

Are high-cost, short-term or installment loans

Are secured by the anticipated wages of a borrower

Accept loan applications remotely through the internet, fax or other means

Transfer loan proceeds directly to a borrower’s bank account or by mail

Collect payments directly from a borrower’s bank account


Not all online lenders are unlicensed. Some lenders hold state licenses and issue loans with the same consumer protections as loans issued by brick-and-mortar lenders. HB3935 does not affect a licensed lender’s ability to make payday loans, payday installment loans, auto title loans, or small consumer loans—it simply gives regulators more effective tools for enforcing Illinois’ consumer protection laws.


Please contact your Illinois representative (look up your elected officials here) and ask him or her to support HB 3935 so that payday lenders operating illegally in Illinois can’t keep families trapped in a cycle of debt.