Category: Illinois

  • New title loan rules in Illinois

    If you lend in Illinois, the new title loan rules go into effect on April 1st. Here are some relevant points with regards to the new laws.

    Some of this is systems based while other parts is operational.

    1. The loan must be computed at simple interest and must be fully amortized.

    2. The maximum loan amount is $4000.

    3. Loans may be refinanced, but the principal must be reduce by 20% at each refinance.

    4. After a refinance, the principal amount of the new loan may not exceed the total outstanding amount of the loan being refinanced.

    5. Loans must be checked against a state database, with loan information – determined by the department – entered into the database. Not until Oct. 1st. 6)A title-secured loan may not exceed $4,000 in principal amount. However, no loan shall be made in such amount that the principal and interest payment for any one monthly payment on the loan exceeds 50% of the obligor’s gross monthly income, except to the extent that loan prepayment is allowed by Section 16(j) of the Act.

    As far as your contract requirements, there are some disclosures that will need to be added to your loan agreements.

    If you want to join a group to get and share information on the new law change, please go to: http://groups.google.com/group/illinois-lenders .

    Please note that you must be a lender to join this group.

  • Fast Cash Loans Settles $2.5M Class Action Suit

    Local news 5 broke the story regarding a $2.5M settlement by a payday lender, Pacific Financial Holding dba Fast Cash Loans.

    What’s remarkable is that the plantiff’s attoneys got 10,000 people to participate. I don’t know a lot about class action law suits, but each person will probably get $200 and the attorney’s will split up $500k. This does not include the attorney’s fees for the defendants.

    I guess the practical advice is don’t leave voicemails, don’t send threatening letters and be nice to people, whether they pay you or not.

    Part of the dilema for payday lenders is that if they outsource their collections, they tend to start throwing good money after bad money. This is one way to hedge your loan companies exposure.

    A collection agency out of Florida collection agency was sued in Illinois for threatening people. There did not seem to be any suits filed against the lender, in this situation.

  • Everybody is regulating payday loans

    If it’s not one government body, it’s another. The city of Springfield, Illinois passed an ordinance to require a minimum distance between payday loan stores.

    I don’t think this stuff works, except for creating less competition among lenders, which ultimately is bad for the consumer.

  • Illinois Attorney General Goes after Payday Collection Agency

    We run a business and are willing to pay for results. This case is the exception. AG, Lisa Madigan, has filed a lawsuit against a Jacksonville, FL collections company.

    Now, there are two sides to every story, but threatening a debtor with jail time and losing custody of their children is a line we cannot cross. It’s dispicable.

    Surprisingly, no charges were brought against the payday lender. It looks like they caught a break.

  • Payday Loan Reform Back in Illinois News

    Republican Joan Krupa has nine days left in her term. She was beat by Democrat Aaron Schock in this year’s election. Ms. Krupa has introduced one single bill that has no chance of advancing. The bill wants to cap payday loan rates at 36%.

    Considering the fact that she will be out of Illinois politics in nine days, she would have more luck starting herself on fire than getting anyone to notice a self serving bill from someone on their way out.

    I think payday lenders in Illinios are safe for now. I don’t know if anyone’s paying attention, but their trying to impeach some guy named Rod Blagojevich.

  • Mortgages, scape goats and the payday lender

    People just believe what they want to believe. Having been part of the PDL industry for quite awhile, I’ll say that the payday loan product has absolutely nothing to do with the mortgage crisis.

    In the end, most of the people that consumer groups “look out for” don’t want to pay anyone back, if they don’t have to regardless of the interest rate. I can’t believe the junk newpapers will print.

    Deeming Illinois “the Wild West of payday loans,” about 75 people from across central Illinois gathered Saturday at First Presbyterian Church downtown for a predatory lending summit. But it was visual bits that portrayed the Central Illinois Organizing Project’s most graphic messages, including a mock funeral with black-draped coffin marked “the American Dream”

    Well guess what, the people that offer services have a right to “the American Dream” also. There is definately a happy medium between 36% and 600%. Lenders are moving towards regulation. The biggest problem I see is that the people who want to get rid of the payday product probably don’t use it.

    Here is a much better (and hilarious) explanation of why we’re in a mortgage crisis.

  • Payday lenders are filling the huge credit gap

    I wish everyone could borrow at 8% interest, but unfortunately, this is driven by our credit systems. The way things work is that you’re essentially placed in a risk group of similar borrowers. In this large group, the people that pay end up paying for the people that don’t pay.

    This is the single hardest concept for so called consumer groups to understand.

    This article does a pretty good job of explaining the payday loan industry in Illinois.

    One comment, I think that it’s very disingenuous for Tim Riggenbach, manager at Associated Bank to tell people “There are options to payday loans. People need to talk to their banker.”

    I want people to be able to borrow at the lowest rate available to them, but this is a joke. I know there are some credit union’s offering similar products, cheaper; but a bank will ask you what you own to find out if they can do a home equity loan or just run your credit. If they can help you, be prepared to wait two weeks and good luck. This is a big “IF”.

    Interestingly, what we’re finding is that borrowers like loans that they can pay off in installments over 6 months.

    There is a huge credit gap between 36% and 521%. Instead of capping rates, lenders should try and fill the gaps.

  • Limits on payday lenders rejected

    In Sprinfield, Illinois there will not be a restriction on payday lending stores. The city council rejected a measure that would require payday loan stores to be atleast 1500 feet from one another. Here is the full story.

    Putting these types of restrictions is justa bad idea all the way around, but especially for the borrowers. Competition usually will bring rates down. Isn’t this what everyone wants?

  • Opinion on capping rates at 36%

    The Progress Illinois blog wrote a very thorough article on the current landscape of the sub-sub prime lending in Illinois. Below is the comment I left on their site.

    Here is the biggest problem in the industry. The people that pay have to pay for the people that don’t pay. There’s always two sides to a story. Here is the other side: the people that pay back a loan are paying for the people that don’t pay back their loan. Probably close to half the people that take out a payday loan, don’t make a single scheduled payment.

    If everyone paid back their loan, you could make the interest rate 7% and everyone could still make money.

    By capping the rate at 36%, you’re just locking people out of the system. If people think that locking these people out of the system is the best interest of everyone, then they can cap the rates. But, why stop there, let’s look at a few other examples like credit cards and mortgages. How about only people with 700 or greater credit scores should be able to have credit cards and/or get a mortgage in this country. Then we wouldn’t have the mortgage crisis and fewer people would be filing bankruptcy.

    By capping the interest rates for the payday loan product, you’re just forcing these people to go on a “financial diet”. The big pink elephant in the room is that if you cap the rates at 36%, what percentage of the people can borrow money at 36%. My guess would be around 10% and they would get a huge lecture from the lender, first.

    If they made a public record of credit scores and the people that use payday loans, they would realize that this customer can’t be lent to for under 36%.

    My opinion is that if you’re using credit to pay for an expense, it doesn’t matter if you’re paying 5% or 500%, it’s not a good financial move. Paying 5% interest for an expense is silly and paying 500% interest is just stupid. You’re telling me that we need a law, in this country, for people to understand this concept? The consumer groups will say, they don’t know what their doing because they’re desperate. We are talking about adults that have the right to vote, right?

    If you cap the rates at 36%, most of the lenders will close their doors and people will go to the internet and get a loan from an offshore company where they don’t even pay federal or state taxes. The people in the middle class and the consumer activist groups will sit down and think they made the world a better place, while the lower middle class will get doors slammed in their face by banks, friends and families because they needed $300 yesterday. Maybe this is a good thing.

    The worst thing you can do is let people off the hook. Regulate the industry and when people come to you and say, I can’t pay this loan back, don’t tell them it’s not their fault because it is. If they didn’t take out the loan, they wouldn’t be in this mess. They’ll ask their friends opinion about their car, their shoes and their new haircut; but when they walk into a payday loan store, they don’t ask anyone’s opinion because they know they’re wrong and no one is holding a gun to their head. So, tell them that it is their fault and that they’re harming themselves and that they shouldn’t borrow money to pay their bills. Finally, tell them not to take out another loan. What ever happened to personal responsibility?

    What the consumer groups and people that care should focus on is how to move the people who do pay and are responsible “up the credit elevator” so that they can get a loan for double digits, instead of triple digits. In the end, this will do more to help people then locking them out of the system. If you cap the rates at 36% this group of borrowers will never move “up the credit elevator.”

    As far as the term “unconscionable”, the sad reality is that this is relative. To the lower, working middle class, these rates are their reality. That’s what free markets is about. There is a wide spectrum. The people that want payday loans to go away, typically don’t use the product. They’re just using their own moral superiority to make these judgements for the people that use it

    Anyone, regardless of interest rate probably wishes they didn’t get the loan after they spent the money and can’t pay it back.

  • Payday loan bill bad for consumers

    Bonnie Schoenberg wrote this story in today’s Daily Herald. I think her point is that more options are better than fewer options. You can get rid of payday lenders, but that would just benifit banks and credit card companies. The demand doesn’t go away.

    The payday issue is so polarized that people are failing to recongnize what’s going on in Illinois. Today, there is a loan that allows a cash advance that’s regulated by the state. It’s called PLRA (Payday Loan Reform Act). So there is an option for someone who wants a cash advance until their payday. The problem is that this is not enough and borrowers want more.

    The PLRA law was supported by the large national payday lenders and was able to pass through the Illinois legislature. Unfortunately, many smaller lenders didn’t think they could make money under this law and didn’t want to deal with the state auditing body and their penchant for interpreting law and fining lenders. These lenders went to 121 day installment loans because it was easier and they could compete against larger payday lenders that are much better capitalized and can handle a large downturn in fees.

    One the large lenders that supported PLRA saw that they could not compete with other lenders, they followed suit and waffled on their promise to offer only payday loans.

    Here is what the general public does not realize. There is a huge demand for money. There is a loan product out there for people that need a cash advance. The reality is that borrowers are not running to this product because it limits their ability to get a loan.

    What most people don’t understand is that a dollar today is worth more than a dollar tomorrow. How much more? It depends on who you are and what your history is of paying people back.

    The reality is that Senator Durbin in his attempt to cap rates at 36% is locking people out of the credit markets. Until a bank or credit card company decides to give these people money, they basically SOL. You don’t promote responsible borrowing by locking people out of the credit markets.

    We could eliminate a lot of things in this country that we personally do not use or like. I hate going here, but I’m going to anyway. There is another place where the government makes decisions for you. It’s called China. It’s a nice place to visit but I wouldn’t want to live there.

    I just don’t understand why people that think or know these loans are bad for them can not just say “NO” and let everyone else make their own decision?