Category: Illinois

  • Illinois HB 537

    On March 21st, Illinois will have a new payday loan law.  The law stems from HB 537 (House bill).  There is some confusion out there b/c there will be two products.  One is a single payment product.  This has a pricing of $15.50 / $100 and the borrower can only be in debt for 45 days before they have a mandatory 7-day cooling off period.  This product is not any good b/c it would put everyone out of business.  The two products have similar elements, mostly b/c they were written by the same legislature, also referred to as people that don’t understand the product or the customer.

    The new product is a payday installment product.  This product was included in the 11th hour of HB 537.  Here are the cliff notes:

    New – Installment Payday Loan

    • Capped at $15.50 per $100 loaned per payment
    • Minimum loan term 112 days
    • Maximum loan term 180 days
    • One refinancing during term of loan, but the second loan within 180 days must have a minimum term of 112 days (refinance before day 68)
    • No Rule of 78s on refunding interest on prepayment
    • Two loans allowed as long as the 180 day term and 22.5% of GMI is not exceeded
    • Loans must be fully amortized
    • Total amount of monthly payments cannot exceed 22.5% of the customer’s gross monthly income
    • 2 day cool-off for pre-payment only
    • Live database for loan approval (Veritec)
    • 12 month period in which lenders may offer the new PLRA loan to their customers with existing CILA loans (not new CILA loans)
    • Lenders with PLRA licenses may ONLY make auto title loans with their CILA licenses – no other CILA loans allowed
    • $1 charge to customer to cover cost of database check
    • No repayment plan for new PLRA loan

    If you need systems help, contact Nick over at Intro XL.  They’re a leading loan software provider in Illinois and can help you or atleast answer your questions.

  • Illinois Gov. signs payday loan bill

    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.

  • Cheklist article about installment lending

    Just read a new Cheklist magazine article titled “Installment Lending: The Next Step“.  It has some good information about Illinois, Wisconsin, CFPA, class action lawsuits and Internet lending.

    Bob Wolfberg of PLS Financial makes a good point.

    “Unfortunately, our story relates to the old saying, a truth takes longer to explain than a lie.  Our harshest criticism has come from officials from states that don’t even allow payday lending, such as in the Northeast, or from the people who don’t need it. I find it very condescending.”

  • Illinois has new payday loan laws

    It’s official.  Illinois has a new consumer loan laws.

    The House voted 108-1-1 to pass House Bill 537.

    The governor has 90 days to sign it, so we should be looking at this bill becoming effective in about one year (between April 1 – May 1, 2010.)

    We have 3 products today:

    1. PLRA 14-day product
    2. Payday Installment Loan (new product)
    3. Title loan installment product.

  • Payday reform bill on verge of passing statehouse

    This comes from Crain’s Chicago.

    “Compromise legislation to overhaul two state laws—the Consumer Installment Loan Act and the Payday Loan Reform Act—cleared the state Senate last week on a 58-1 vote and is pending in the House. Representatives of both consumer groups and lenders, which have battled for three years to close what critics have called a loophole in the payday loan law, expect the House to send the bill to the governor’s desk when lawmakers return to Springfield later this month.

    The compromise, negotiated by bill sponsor Sen. Kimberly Lightford, D-Maywood, would impose a cap of 99% on consumer installment loans under $4,000 and 36% for those above that threshold. Previously, interest rates under the consumer installment loans were unregulated, leading payday lenders subject to rate caps to offer slightly longer-term loans in order to fall under the less stringent law.

    Lenders operating under the consumer installment law charge rates as high as 700%, consumer advocates say.

    The Payday Loan Reform Act, meanwhile, would be amended to increase the allowed terms of the loans to six months from four. Remaining the same is the limit of charging no more than $15.50 per $100 loaned out every two weeks.”

    There are many unknowns, at this point.   The good news is that a bill does not become a law until 9 months after the governor signs it.

  • Quiet in Illinois

    HB 537 has until tomorrow to pass.  This bill will cap rates on installment loans to 99% among other things.

    This bill is not supported by the CFSA or ISLA in Illinois.

    If the bill passes, all cash advance lenders will have to start offering payday loans, which are regulated to allow.

    Loan Terms:
    Maximum Loan Amount: lesser of $1000 or 25% gross monthly income
    Loan Term: 13-45 days
    Maximum Finance Rate and Fees: $15.50 per $100
    Finance Charge for 14-day $100 loan: $15.50
    APR for 14-day $100 loan: 403%

    Debt Limits:
    Maximum Number of Outstanding Loans at One Time: Two
    Rollovers Permitted: None (cannot rollover)
    Cooling-off Period: 7 days after 45 consecutive loan days
    Repayment Plan: Yes

    Collection Limits:
    Collection Fees: One $25 NSF fee (Presentment limit = 2)
    Criminal Action: Prohibited

  • Illinois bill has until May 7th to pass

    Senate bill 655 has until May 7th to pass.  Illinois currently has two models for the cash advance industry.  The first model is offering payday loans and has a state database.  The other model is offering installment loans.

    This bill will cap rates on loans greater than 121 days to 99%.  Practically everyone, including the CFSA, are backing the new bill.  Small and medium size cash lenders, specifically ISLA (Illinois Small Loan Association) are against it.

    I’d love to hear both sides of the argument, CFSA and ISLA.

  • Thought provoking article on Illinois

    This article titled “Americash Takes Its Cash-Strapped Customers To Court” totally bashes cash advance lenders in Illinois.  It’s main gripe is that most lenders are offering loans greater than 120, so they do not fall under some prohibitive payday loan laws.

    This article attacks Americash, who is a big player in Illinois, for taking borrowers to court and getting court ordered wage garnishments. Most of these cases result in default judgments b/c the defendants do not show up to court. What they do not mention is that this is a civil court. If the debtors show up, they’ll likely get off very easy.

    There is currently a bill out there that will cap installment loans at 99% interest.  This would effectively push all cash advance lenders into payday loans.  You can read more about that bill here.

  • Illinois payday loan industry clashes

    The HB 537.  What’s interesting about this bill is that it puts 2 groups on opposing sides.  CFSA is supporting the bill that would cap non-payday installment loans to 99% APR, while ISLA (Illinois Small Loan Association) is against it.   The last time these two organization butted heads, the CFSA won and payday loan legislation passed.

    It’s no secret, in Illinois, that most lenders are offering installment loans greater than 121 days.  After the payday loan reform act (PLRA) was passed in 2005 the majority of payday lenders stopped giving out payday loans and opted for an installment product.   The PLRA law limited borrowers to one loan and no renewals.

    This situation is unique compared w/ other states that are fighting legislation, but the CFSA is going to have their hands full.  ISLA is no hump.  It has members like privately held, PLS Financial, which had $219M in revenues in 2009 and publicly held, The Cash Store with $150M in sales.

    You can read more about this legislation in Progress Illinois.

  • Atleast $70k fraudulent Internet loans

    “A temporary employee for AT&T was arrested today on charges she stole personal information on 2,100 co-workers and then pocketed more than $70,000 by taking out short-term payday loans in the names of 130 of them.”

    That’s pretty scary. I wonder what the lenders could have done differently. Didn’t they realize that all the money was going into just a few accounts?

    I think matching a person’s name with a bank account is a great service. Can anyone recommend one?

    You can read the full article in Chicago Breaking News.