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Payday Loans Reform Legislation Passes General Assembly
Information provided by AARP Illinois - Published: 2010-05-26
Payday Lending Reform Legislation Passes General Assembly - AARP Urges Governor Quinn to Sign into Law, Help Protect Consumers.
Individuals and families trying to get some financial assistance to survive through a tough economy, often find themselves in an unending cycle of debt when they fall prey to abusive consumer installment loans who charge them astronomical rates. But legislation that today passed the General Assembly offers hope to Illinoisans as it will significantly strengthen existing consumer protections.
House Bill 537, sponsored by Senator Kimberly Lightford and Representative Lou Lang, passed the House by a vote of 108-1, and will be sent to the Governor's desk. The measure had passed the Senate 58-1 earlier in May. AARP, which backed the legislation, is urging Governor Quinn to sign into law as soon as possible.
"Older individuals, low-income residents and working families who need money to pay their bills or take care of an emergency, are often victimized by unscrupulous payday lenders who charge them abusive rates and excessive fees," said AARP Senior Manager for Advocacy and Outreach, Nancy Nelson. 'This legislation will help break the cycle for debt for thousands of Illinoisans. We commend the legislation for their leadership in passing this bill, and urge Governor Quinn to sign it into law."
HB 537 strengthens the protections included in the 2005 Payday Loan Reform Act. The 2005 measure defined payday loans as having terms of 120 days. But abusive lenders found loopholes to issue loans without any caps in rates, and no limits to the length of terms or the number of loans allowed per borrower.
The new legislation will greatly improve consumer protections by:
* Setting reasonable rates for all payday and consumer installment loans, including rates of 36% to 99% for longer-term consumer installment loans.
* Preventing the cycle of debt caused by frequent refinancing.
* Re-establishing lending based on a borrower's ability to repay.
* Creating a fully amortizing payday product, with no balloon payment.
* Keeping loans repayable by limiting monthly payments to 22.5% or 25% of a borrower's gross monthly income.
* Eliminating additional fees, including post-default interest, court costs and attorney's fees.
* Ending the current practice of penalizing borrowers for paying off loans early.
The bill was championed by the Monsignor Egan Coalition for Payday Loan Reform, a broad alliance of advocacy organizations that includes AARP, Action Now, AFSCME Council 31, Citizen Action, Central Illinois Organizing Project, Illinois AFL-CIO, Illinois PIRG, Lutheran Social Services of Illinois, Protestants for the Common Good, SEIU Illinois State Council, Sargent Shriver National Center on Poverty law, Voices for Illinois Children, Woodstock Institute and many others.
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