May 26, 2010
This morning, the Illinois House concurred with the Senate amendments to HB 537, legislation that would close a major loophole in the 2005 Payday Loan Reform Act. This compromise measure passed 108-1-1. Crain's explained the underlying provisions several weeks ago:
The compromise, negotiated by bill sponsor Sen. Kimberly Lightford, D-Maywood, would impose a cap of 99% on consumer installment loans under $4,000 and 36% for those above that threshold. Previously, interest rates under the consumer installment loans were unregulated, leading payday lenders subject to rate caps to offer slightly longer-term loans in order to fall under the less stringent law. [...]
The Payday Loan Reform Act, meanwhile, would be amended to increase the allowed terms of the loans to six months from four. Remaining the same is the limit of charging no more than $15.50 per $100 loaned out every two weeks.
At the same time, payday lenders won’t be allowed to offer their loans under the Consumer Loan Installment Act, a law that is meant to apply to loans secured by car titles and signed-check loans made by credit-card companies and other consumer finance firms.
While a 99 percent APR still seems astronomical, it is a great step in the right direction considering that these lenders often charged interest rates as high as 700 percent.
UPDATE (3:30 p.m.): Members of the Monsignor John Egan Campaign for Payday Loan Reform Coalition are pleased with the outcome. From a statement:
“Capping rates for short-term loans was our number one priority,” said Woodstock Institute Vice President Tom Feltner. “These reforms, passed overwhelmingly by the General Assembly with bi-partisan support, succeed in doing this and will ensure that borrowers are not stuck in long-term, 700 percent loans.”
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