Payday Loan Reform Passed by the Illinois General Assembly
On May 26, 2010, Illinois consumers scored a major victory when the Illinois House passed the Senate amendments to H.B. 537, a strong payday loan reform bill, by a vote of 108-1. Governor Quinn now has 90 days to sign the bill into law.
Payday loans are small, short term loans made at predatory interest rates that can approach 700 percent. These loans are simple to obtain and require little documentation regarding the consumer’s ability to repay the amount borrowed. Not surprisingly, borrowers often find themselves unwittingly pushed into a vicious spiral of debt, which then compounds at astronomical interest rates. H.B. 537 helps to break this cycle of debt for Illinois consumers by strengthening the consumer protections passed in the 2005 Payday Loan Reform Act.
This bill further protects Illinois consumers by:
• Ensuring reasonable interest rates of 36% for installment loans over $4,000, 99% for small consumer loans, and maintains the current rate of no more than $15.50 per $100 per two weeks for payday loans,
• Limiting the cycle of debt by ensuring that lenders cannot make a payday loan to a consumer that would result in more than 180 days of continuous indebtedness,
• Establishing a consumer reporting database to ensure that consumer protections for payday loans and small consumer loans are enforced,
• Eliminating balloon payments on all consumer installment loans,
• Keeping loans repayable by limiting monthly payments to 22.5% or 25% of a borrower’s gross monthly income,
• Eliminating additional fees, including post-default interest, court costs and attorney’s fees, and
• Ending the current practice of penalizing borrowers for paying off loans early.
The Chicago Appleseed Fund for Justice supported Senator Kimberly Lightford and the Monsignor John Egan Campaign for Payday Loan Reform’s reform efforts with targeted research that helped to show that consumers in states that have passed tough payday lending reform still have small dollar credit options available to them.
The Chicago Appleseed Fund for Justice strongly urges Governor Quinn to sign this bill into law. You too can support putting an end to 700 percent payday loans by contacting Governor Quinn at 217-782-0244 or here and asking him the sign H.B. 537 into law.