Gov. Pat Quinn signed into law a bill that will cap rates for installment loans in Illinois. The new law caps loans under $4k to 99% and over $4k at 36%. The way Illinois works, a law goes into effect 9 months after it’s signed. This would make this bill “live” on April 21, 2011.
What the article directly from the state of Illinois website does not say is that another alternative product is being allowed under the PLRA (payday loan reform act). This product will charge around the $15 per $100 price point. It will be tied into the Veritec state database. Although $15 per $100 sounds pretty good, the problem is the limit on loans that an individual can take out. Small mom and pop operations feel like they’re at a disadvantage b/c they do not have the marketing, locations and cash to compete with large national chains.
Consumer groups have fought for this reform for quite a while. One of the hold ups, was that any rules imposed would step on the toes of other lenders like American General and HSBC. The payday industry is not happy with the new law, but fought pretty hard for the alternative product.
Comments
2 responses to “Illinois Gov. signs payday loan bill”
I think this is only going to hurt the Illinois economy as many smaller lenders won’t be able to deal with Caps and simply go out of business hence there will be less jobs in that state and less tax revenue for the State.
Job of government is not to put limitations but it is to create opportunities. If Illinois governor is so worried about struggling residents being taken advantage, perhaps they can help them to stand on their feet by improving the State’s economy, end corruption (Illinois in particular Chicago is well known for that) and promote healthy competition among payday and other short term lenders so they voluntarily lower their fees rather simply signing a law.
Al, thanks for the comment. The sad reality is that the state is hurting consumers, more than it’s helping them. With rate caps, they just take all the competition out of the industry.
It’s unfortunate that the Gov does not want citizens to take responsibility for their decisions. It’s not surprising considering that the state is close to being bankrupt.