Payday loans, which offer unsecured, short-term credit at an exorbitant rate, have been shown to target low-wealth communities and trap countless borrowers in a long-term cycle of debt. It is this cycle of debt that led dozens of community and consumer groups from across the state to demand an end to high-cost, unsustainable payday lending.
Refund anticipation loans allow taxpayers to receive their expected tax refund in one to three days, compared to the ten days it would take to receive a refund through direct deposit. RALs often come with very high fees and the borrower must repay the full loan amount—with high interest rates—if the refund turns out to be less than expected.
Sponsored by Sen. Kimberly Lightford (D-4) and Rep. Lou Lang (D-16), the proposal passed the Illinois Senate on May 5 by 58-1 and the House by 118-1 on May 26.
These are the kind of sobering statistics that experts presented to more than 100 representatives from community, research, financial, regulatory, and government groups at “Beyond Foreclosures: The Impact of the Financial Crisis on the Wealth Gap and Economic Opportunity.” Indeed, a staggering number of consumers lack sufficient access to banking services that would help them build wealth, do not have opportunities to build a positive credit history, and must resort to the costly and stigmatizing process of bankruptcy.
“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.”
Call Governor Quinn at 217-782-0244 and tell him that you support strong consumer protections.
The proposal caps rates for nearly every short-term credit product in the state, prevents the cycle of debt causes by frequent refinancing, and gives regulators the tools necessary to crack down on abuses and identify potentially predatory practices before they become widespread.
Let Governor Quinn know that you support HB537 because it:
This amendment, to be offered by Senator Sheldon Whitehouse (D-RI) during the floor debate on the Restoring American Financial Stability Act (S. 3217), would restore to the states the ability to enforce interest rate caps against out-of-state lenders. By doing so, it would level the playing field so that local lenders such as community banks, local retailers, and credit unions no longer are bound by stricter lending limits than national banks and credit card companies.
Auto dealers are concerned about a federal consumer financial protection agency because they often broker loans, in partnership with banks or credit unions, for car purchases—in fact, they issue almost 80 percent of loans and leases used for car purchase. With $850 billion in outstanding balances, dealer-issued car loans comprise a market as large as the credit card market.
Predatory credit is offered at long-term, triple-digit interest rates; marketed to desperate borrowers; and frequently refinanced or contains balloon payments that mire borrowers in a cycle of debt. Any payday installment loan that fits this description is just plain predatory. We recognize that many products do not fit this description and play a meaningful role in many families' financial path.
The General Assembly is preparing to vote on long-needed reforms for high-cost, long-term installment loans, and end the loophole in the Payday Loan Reform Act, and they need to hear from you.
