Category: Illinois

  • Illinois Pols Receive More From Payday Lenders Than Any Other State

    Why do people autoatically assume that this is a bad thing? Providing campaign contributions is a good thing. There isn’t a single effetive organization out there that doesn’t donate to campaign funds. The industry is operating in good faith above the table.

    It looks like Illinois’ lenders are pretty organized compared with other states. Payday lending is a complicated issue. Many people need short term capital. It’s important to try and get it right for both sides. No one is against regulation, just make it reasonable.

    Here is the article.

  • Who’s Right? Maybe No One?

    “In a study conducted by the Federal Reserve Bank of New York, researchers found that states with bans on payday lending experience an increase in bounced checks, higher rates of bankruptcy, and more complaints related to collections” writes Matthew Glans in the Illinois Daily Herald titled “Payday loan bill is regulatory overkill.”

    Eight days later, in the same newpaper, Debbie Goldstein of the Center of Responsible Lending writes: “According to CRL’s research, borrowers who receive five or more loans a year account for 90 percent of the lenders’ business.”

    The one thing I don’t get is that the payday lenders have put the loan sharks, more or less, out of business. Isn’t this a good thing?

  • Are City Zoning Laws Becoming a Trend?

    Not municipalities are getting involved in payday lending regulation. Casa Grande in Arizona is trying to change their zoning laws to limit payday loan stores to establish distance requirements for payday loan stores.

    The article also goes on to state, “the city cannot pass laws that would put an operation out of business just because it is not wanted there. Any change to the zoning laws would affect only new payday loan stores. The hope is to control their proliferation, given that more and more of the stores have been popping up.”

    This is worth noting because we’re seeing it more and more around the country. For example, in Peoria, Illinois that is trying to pass a 180 day moratorium on new building permits for payday loan companies.

    Many critics like to blame payday loan stores for hurting real estate in an area. Personally, I think it would be deceptive to control what people see and don’t see, when it’s legal to give a payday loan.

    Less competition can only hurt the consumer and help the lenders that are already in place.

  • Limits on Title Loans in Illinois

    Most title lenders in Illinois give loans of atleast 61 days or greater. The new rule would will not except these lenders from refinance limitations and instigate a cool off period. I have no idea how they’re going to enforce this. How does a lender know if someone else gave a person a loan less than 15 days ago?

    Regardless, these rules have to get through committee. This Blog does a very good job of explaining the process.

    The Chicago Tribune also published the story, “Limits on title loans called a ‘Good Start’“

  • Illinois Senator Dick Durbin is Wants a 36% Cap

    If the government capped mortage rates at 5%, how many people would own a house?

    I think you can call it politicians being politicians. It sounds very noble to try and help people. Dick Durbin wants to cap rates at 36%. I would prefer if he would just say, we’re trying to close the industry down.

    The problem with this argument is that people hear 500% interest and are shocked. Would you take a $2,000 taxi to NY from Chicago or would you buy a $200 plane ticket.

    Think about it, would you give $300 to a person with a credit score in the 400’s and only make $4.14. It costs atleast $12/hour for just one employee, not to mention rent, utilities, advertisment, liscensing and everyone needs a manager. The loan itself would take 20 minutes to process. They can’t break even operating in their current state.

    In the end, the politicians are just going to make consumers less able to make a decision for themselves, which ultimately leads to increased financial illiteracy. Instead of making consumers smarter, more experienced; we just make the lenders unprofitable.

    If they shut down the industry, the world will go on. I would like to see the government offer $300 at 36% to anyone who needs it. If they shut down the industry, they should step up to the plate and fight the demand for short-term money.

  • SB1993 Is Dead in Illinois

    If you’re not familiar with senate bill 1993, it’s a that was proposed in the 2008 session. This bill didn’t pass, so the industry has another year of self reflection.

    This issue is complex because there are a few different interest groups at work: the consumer groups, the CFSA and the ISLA.I think that Illinois is committed to regulating these small, short-term loans; which is a good thing.

    After seeing the hardline approach taken by Arizona and Ohio, I would be willing to hammer out a deal.

    Interestingly, my business partner, Kosta, made a pretty good observation. He likened this process to what the NRA has been opposing all these years. Once the NRA became somewhat, more reasonable and stopped stonewalling, things became more about the issues and they got support from many people that had been either against mostly because they perceived them as mean and unreasonable.

    The issue becomes the issue again instead of a reactive state or just a political tug-of-war. Anyone that has any experience knows that this industry can’t survive on double digits interest rates. The charge-offs are just way to high.The industry would be well served by releasing data about default rates and charge offs.

    If payday lenders put the business model in perspective for the community, they will start to see that this segment of the market is very difficult to serve, if it were not for the high rate of return. If they want to protect the consumer, they should the damages that lenders can collect and allow the market set the prices.