Can Consumers Cope When Payday Loan Rates are Capped?

Survey results show promise for fast cash alternatives

Andy Spears
2 min readFeb 24, 2022


Photo by Andres Perez on Unsplash

A survey conducted by the Woodstock Institute with partners New America Chicago and the Chicago Urban League shows that payday loan rate caps are having a positive impact on consumers and communities.

The survey comes as Illinois experiences a new landscape in short-term, small dollar loans following the passage of the Predatory Loan Prevention Act (PLPA).

The survey found that consumers who previously relied on predatory loans–with average interest rates of up to 297%–have successfully used other avenues to gain access to capital following last year’s landmark legislation, the Predatory Loan Prevention Act, which caps consumer loans at an annual percentage rate (APR) of 36%.

Since that time, predatory lenders have closed en masse because their profit margins relied on trapping consumers in a cycle of debt. With such high interest rates, consumers would often be unable to pay without taking on even more debt. In just the five months after the rate cap went into effect in March 2021, Illinois consumers saved over $200 million in predatory loan fees.

Consumers Still Borrowing, Not Getting Ripped Off

Instead, as in other states with rate caps that saw similar closures of predatory lenders, Illinois consumers currently use a variety of available resources and strategies to address their financial needs. 75% of total respondents had tried to borrow cash or knew a family member or friend who had tried to borrow cash in the six months before taking the survey. Of those respondents, 86% were able to borrow some or all of what they needed.

This high percentage shows, even with Illinois’ 36% rate cap, the vast majority of Illinois consumers are able to borrow money — whether through a traditional lender or some other means, such as friends or family.

“We have long known that Illinois consumers do not need loans that charge 297% APR,” said Brent Adams, Senior Vice President of Policy & Communication at the Woodstock Institute. “Now that the predatory lenders have left the State, consumers have a significantly better chance to build wealth and rebuild their communities.”



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .