From the Senior Vice President of Policy & Communication

The Predatory Loan Battle Heats Up (Again)

We have reached another crossroads in the battle to protect consumers from predatory payday and auto title loans.

President Trump’s freshly appointed Director of the Consumer Protection Financial Bureau, Kathy Kraninger, on February 6, 2019, proposed to gut the payday loan protections developed and finalized under the leadership of former Consumer Bureau Director Richard Cordray, a champion for consumers whom we honored at our Community Investment Awards Reception last year. Adding insult to injury, the Kraninger proposal was released on the day after a coalition of consumer groups, including Woodstock, Northwest Side Housing Center, Shriver Center, Young Invincibles, and Chicago Urban League, met with Kraninger in Chicago and asked her to preserve the payday loan protections. She was evidently unpersuaded.

To describe the Kraninger proposal as a “gutting” is not overly dramatic (the New York Times used the work “cripple.”) The core of the payday loan protections is a requirement that payday lenders, on most loans, determine that prospective borrowers can actually afford to repay the loans. These protections, which have also been subject to litigation brought by the industry, were meant to take effect on August 19 of this year. Suffice it to say, that’s not happening.

Woodstock is leading the effort in Illinois to collect comments opposing the Kraninger proposal. In addition to collecting consumer comments, we are urging folks in the Illinois Congressional Delegation to comment. We have learned that the Consumer Bureau will be using a computer to scan comments to determine whether comments are substantially the same as one another. Comments that are substantially similar to one another will be grouped together and essentially considered to be one comment. Therefore, we are urging folks to submit original comments — even handwritten comments that are three-to-four sentences expressing why you support the common sense requirement that payday lenders perform an ability-to-repay assessment of potential borrowers. To help folks get started, we have prepared a sample comment that is Illinois-specific. In addition, we will host a Payday Postcard Pizza Party at our office at 3 pm on May 3, 2019, at which we will have an ample supply of pens and self-addressed post cards for folks to use to prepare their own individualized comment. If you would like to join us, please RSVP to Jenna so we know how much pizza to order!

While the payday loan battle at the federal level heats up, a bill is moving in Springfield that would dramatically alter the landscape of predatory auto title lending in Illinois. Woodstock, along with our partners at the Illinois Asset Building Group (IABG), released a report on auto title lending in Illinois in October 2015. The report highlighted the triple-digit interest rates charged by auto-title lenders and the fact that most borrowers are lower-income, earning $30,000 or less per year. Since then, little has changed. Learn more about the predatory lending landscape in Illinois on our payday fact sheet.

Currently, the average annual percentage rate (APR) on title loans in Illinois is 188 percent! The Fair Lending Act (HB 2468 Welch), which has bipartisan support, would cap the interest on auto title loans at an APR of 36 percent. Presently, there is no interest rate cap on auto title loans in Illinois. For mostly political reasons, auto title loans were carved out of reforms adopted in 2010 that established interest rate caps on all installment loans except auto title loans. The Fair Lending Act, which is spearheaded by IABG and actively supported by Woodstock, passed the House Financial Institutions Committee unanimously on March 13, 2019. We will be alerting folks when you should contact your state representative and state senator urging them to support the bill. Expect to hear from us again soon (join our advocacy mailing list!), and don’t forget the Payday Postcard Pizza Party!