Stopping Payday Predators Creates Jobs

Andy Spears
2 min readMar 22, 2021

The Woodstock Institute has produced a report indicating that capping payday loan interest rates in Illinois at 36% would create jobs and stimulate economic activity.

According to the Center for Responsible Lending, the maximum rate on small dollar loans (payday, car title) in Illinois is 404%.

The Predatory Loan Prevention Act seeks to change that, capping interest rates at 36%. According to Woodstock, doing so would have a number of benefits. Consider the following:

Based on just the estimated savings in fees paid to out-of-state lenders, the multiplier effect could add between $475 million and $634 million in local economic activity. Based on the savings for fees paid for payday loans, installment payday loans, and auto title loans to both in-state and out-of-state lenders, the impact could be between $638 million and over $835 million.

This renewed economic activity also has a job creation impact:

Based on data showing total fees paid in 2019 by Illinoisans on payday loans, installment payday loans, and auto title loans, Woodstock projects the law will create 5,673 jobs, a net gain over the 5,000 jobs opponents claim will be lost, which is, itself, debatable.

The payday predators suggest rate caps will cause lost jobs, but the analysis from Woodstock indicates the opposite is true:

The Illinois Small Loan Association (ISLA) misleadingly asserts that a 36% rate cap in the Predatory Loan Prevention Act could result in “as many as 5,000 jobs being lost.”(i) The ISLA statement is misleading and incorrect. The assertion ignores the job creation impact of the $400 plus million in savings that borrowers will have to spend on goods and services other than predatory loan interest and fees. The hundreds of millions of dollars in new spending will create jobs, and the data suggest that it will create 5,673 jobs, a net gain over the 5,000 jobs opponents claim will be lost. Put simply, the 36% rate cap will not result in net job losses; it will shift the jobs from those that are supported by predatory lending to those that provide other goods and services to the community.

The savings from a rate cap equates to additional consumer spending, a job creation tool:

The $268.1 million in additional spending from the savings that borrowers realize with the 36% rate cap would result in the creation of 2,994 direct jobs(iii) and 2,679 indirect jobs(iv), for a total of 5,673 new jobs created in one year. And that’s just the savings associated with loans originated by non-Illinois lenders.

Read the full report and learn more about the Illinois Predatory Loan Prevention Act.

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Andy Spears

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