A year ago, Illinois’ Predatory Loan Prevention Act went into effect, creating a 36% interest cap on consumer loans. I was one of the legislators who fought hard to get that price cap passed. Payday lenders were charging over 300% interest. Low-income people who needed money to meet an emergency often felt they had no other choice. It was a business model that thrived on desperation and profited from want.
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But as we debated the idea, its opponents – the predatory lending industry – said the rate cap would prevent people from getting the credit they needed. They claimed payday lenders would have to shut down if they couldn’t charge those rates, and the poor would have nowhere to go for quick access to cash.
As we approached the first anniversary of the law, I wondered: what really happened? Has the sky really fallen? I decided to look at the numbers.
It turns out that almost all payday lenders and title lenders left the state after the PLPA was passed. I guess their business model just can’t work if they don’t charge exorbitant interest rates.
But that doesn’t mean low-income people have lost access to credit. In effect, it meant they had access to better loan products at a lower cost.
Since the law was passed, the Illinois Department of Financial and Professional Regulation has licensed 46 companies to provide installment loans at rates below 36%. Some of these lenders have interest rates as low as 6% to 8%, depending on the borrower’s credit.
Capital Good Fund, a national organization that provides fair loans to low-income families, reports that in the days following the passage of the PLPA, they saw an almost 70% increase in applications and new loans granted to Illinois customers.
“As predatory lenders close their doors,” said Andy Posner, CEO of Capital Good Fund, “families will look to other options.”
Indeed, that is exactly what happened in Illinois. The PLPA created a vacuum when the predatory lenders left. And that void has been filled by better lenders who can comply with the law, while making a profit and serving low-income people more equitably.
As a result, Illinois consumers saved hundreds of millions of dollars in fees and interest in the law’s first year.
It’s expensive to be poor in America. But a year ago we did it a little cheaper here in Illinois. And we will continue to fight in Springfield to help people get back on their feet without being taken advantage of.
Will Guzzardi, State Representative, 39th District
Increase worker power
WTTW’s recent notice to strikers that their employer-sponsored health insurance will be discontinued effective April 1 adds further evidence, on top of the many that have accumulated during the pandemic, of the need for a national health care program. single-payer health insurance for the United States.
WTTW is using this anti-union bullying tactic in its attempt to further widen the gap between workers and wealthy donors and executives. from all of us.
Anne Scheetz, MD, Logan Square