Governor Pat Quinn Approves Rep. Lou Lang’s Bill to End Predator 1,000% Interest Pay Day Loans in Illinois

Governor Pat Quinn

(Chicago, IL) – Governor Pat Quinn yesterday signed legislation into law that eliminates 1,000% interest “pay day loans” in Illinois.

Quinn signed a bill into law that will increase protections for Illinois residents obtaining consumer installment loans and cap interest rates charged by consumer finance companies.

“Many consumers who take out short-term loans are doing so as a last resort to pay their bills and provide for their families.” said Quinn. “It is important that we do everything we can to protect these consumers who are already hurting, by helping to make these loans more affordable.”

The legislation, House Bill 537, sponsored by House Deputy Majority Leader Lou Lang (D-Skokie) protects consumers by setting “reasonable” interest rates for loans.

Payday loan predators have peddled consumer installment loans in Illinois with interest rates that have averaged 341% and have reached 1,000%. Under the new law, rates on consumer installment loans will be capped at 99% for loans $4,000 and less and 36% for loans greater than $4,000.

“The days of legal loan-sharking are gone,” said Lang. “This new law will end the financial serfdom imposed on struggling, working families by payday loan companies.”

During February 2006 through December 2008 204,205 payday loan consumers took out 1,194,582 payday loans, or an average of 5.9 loans per consumer, according to March 2009 report by the Illinois Department of Financial and Professional Regulation.

Attorney General Lisa Madigan, said, “House Bill 537 reigns in abusive and predatory lending practices and protects consumers. I want to thank … Representative Lang, the Governor’s Office and consumer advocates for their hard work on this important consumer protection legislation.”

The new law also includes provisions to help borrowers repay loans more easily:

  • Lending is based upon the borrower’s ability to repay the loan.
  • Monthly payments on consumer installment loans are limited to 22.5 percent of the borrower’s gross monthly income.
  • In order to give borrowers enough time to repay the loan, the new minimum loan term will be set at six months – an increase from the previous four month term.
  • The law also eliminates balloon payments and prevents lenders from penalizing borrowers for paying off loans early.

“We look forward to working with licensed lenders and their customers to make sure this law is strictly enforced,” said Secretary of Financial and Professional Regulation Brent Adams.

The law also expands the existing statewide database that tracks payday loans to also track consumer installment loans, which will enable the state to ensure that lenders are complying with the new law.

The law takes effect within nine months of Quinn’s signature.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: