Illinois Gov. JB Pritzker yesterday signed the Predatory Loan Prevention Act into law. The law caps interest rates for payday and other small dollar loans in the state at 36%.
Consumer advocates have been pushing for the change. In fact, the Woodstock Institute recently released a report highlighting the economic advantages of the new law. Among them, the creation of jobs and the return of millions of consumer dollars to local economies.
Here’s more on the signing of the bill:
The Predatory Loan Prevention Act (SB 1792), would directly address long-standing inequities by prohibiting lenders from charging more than 36 percent APR (annual percentage rate) on consumer loans. High-cost, small-dollar loans heighten the racial wealth gap, and stopping high interest payday lending is a significant step toward immediate relief for consumers.
In Illinois, the average APR on a payday loan is 297 percent, and the average APR on a title loan is 179 percent. While the existing federal law already protects active-duty military with a 36 percent APR cap, this legislation would extend the same protection to Illinois veterans and all other consumers.
Illinois families pay over $500 million per year in payday and title loan fees, which is the fourth highest in the nation. With this legislation, Illinois will join a bipartisan, nationwide trend that provides families with more economic stability. Currently, 17 states in addition to the District of Columbia have caps of 36 percent or lower.
“Just as it is with redlining, with bias in insurance rates, and with the ongoing disparity in home lending, this is not just about financial ethics. It’s about racial justice,” said Sen. Jaqueline Collins (D-Chicago). “There is a growing understanding among Illinoisans that these financial systems target people of color and entrench racial poverty. When we have honest, hard conversations, we can topple barriers.”
“Providing access to affordable, small loans to assist families during times of economic stress, such as vehicle breakdowns and unexpected medical bills, is an important and just way to lift families out of debt, particularly in communities of color that have historically been disproportionately impacted by high cost loans,” said Deborah Hagan, Secretary of the Illinois Department of Financial and Professional Regulation. “I applaud the historic work of Governor Pritzker and the Black Caucus and look forward to implementing this new law to benefit of Illinois consumers.”
“Some lenders charge 179%-297% interest. That is just criminal. I commend the Illinois Legislative Black Caucus and Governor Pritzker for making this legislation a reality at such a critical time as more people are struggling to make ends meet and turning to payday and auto title lenders,” said Comptroller Susana A. Mendoza.
“We applaud Governor Pritzker and the Illinois Legislative Black Caucus for championing the passage of the Predatory Loan Prevention Act,” said Rachel Ruttenberg, Director of Policy at Heartland Alliance. “This important law provides financial security and stops predatory, high-cost lending practices, which have widened the racial wealth gap and disproportionately targeted communities of color with payday and car title lending.”
“Today is the culmination of over 20 years of advocacy,” said Brent Adams, Senior Vice President of Policy & Communication at Woodstock Institute. “Thanks to the leadership of the Legislative Black Caucus, Illinois will go from being home to some of the worst abuses in the industry to setting a new bar in consumer financial protection.”
SB 1792 takes effect immediately.
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