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.

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