Illinois organizations band together to demand stricter regulation for payday lenders
Inside Subprime: April 4, 2018
By Holly Kane
Dozens of Illinois-based organizations are looking to lawmakers to curb predatory payday lending in Illinois, according to a March 27 press release from Heartland Alliance, an anti-poverty organization based out of Chicago. Heartland Alliance is one of 36 local organizations – including the Woodstock Institute, Illinois PIRG and the Shriver Center – which signed a letter demanding Illinois legislators enforce stricter regulation on payday lenders.
The letter urges lawmakers to oppose a joint resolution calling for the repeal of the Consumer Financial Protection Bureau’s October 2017 rule, which aims to curb “payday debt traps.” The rule, which specifically calls out payday and auto title loans, would require lenders to use approved credit reporting systems to determine whether potential borrowers will be able to repay their loans.
“The payday lending debt trap is a harsh reality for many Illinois payday loan borrowers, the majority of whom make less than $30,000 per year,” wrote a rep for Heartland Alliance in the press release. “Research shows four of every five loans are re-borrowed within the month; and as a result, Illinoisans pay over half a billion dollars per year in fees.”
The resolution, introduced March 22 by Sen. Lindsey Graham, proposes that the CFPB rule “shall have no force or effect,” rendering the agency unable to compel lenders to perform credit checks. Unbeknownst to some borrowers who take out payday loans, even a seemingly easy $400 loan can come with some serious consequences. Between the sky-high interest rates and the small amount of time a borrower has to pay back the loan, many payday loan borrowers get trapped in a cycle of debt that leaves them in worse financial shape than they were when they took out the loan, which is something the agencies that signed the letter are actively trying to combat.
Heartland Alliance, for example, works in areas throughout the city to build economic security in underserved populations, including those who seek payday loans the most often. In Chicago’s Uptown neighborhood, Heartland offers a free workshop on predatory lending at their Leland Avenue location, just a few blocks from payday lender AmeriCash Loans, which advertises no credit check loans on its website. Compared to AmeriCash, which boasts access to fast, easy cash, Heartland Alliance pushes “lasting positive change.”
The letter states that Graham’s resolution would help predatory payday lenders to “trap consumers in an endless cycle of 300-plus interest debt,” and encourages Illinois Senators Dick Durbin and Tammy Duckworth to fight to protect the CFPB rule.
“At its core, the rule is based on the common sense principle that lenders have a responsibility to determine whether a borrower has the ability to repay their loan without getting stuck in a cycle of unaffordable debt,” the letter states. “This principle is particularly important for these high‐cost loans where lenders obtain, as a condition of the loan, the power to tap directly into a borrower’s bank account. An ability-to-repay requirement is a sensible approach and a principle that, according to a recent poll of likely voters, is supported by more than 70 percent of Republicans, Independents, and Democrats.”
To learn more about payday lending in Illinois, check out these related pages and articles from OppLoans:
- A Primer on Payday Loans in Chicago
- Why Title Loans are so Dangerous
- A guide to payday and title lending in Springfield, Illinois