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.
