Advocates Publish Resource Guide to Help Borrowers
For Immediate Release
Contacts:
Cara Yi, Wyn-Win Communications | cara@wyn-win.com
Jane Doyle, Woodstock Institute | jdoyle@woodstockinst.org
Once considered the “Wild West” in predatory lending, Illinois now protects consumers from an industry that routinely charged lower-income families triple-digit interest rates. After a hard-won fight by a coalition of consumer advocates and the Illinois Legislative Black Caucus, along with bipartisan support in the Illinois General Assembly, on March 23, 2021, Governor J.B. Pritzker signed into law a 36% rate cap on all loans in the state.
The new rate cap, which will be applied only to new loans, saves Illinois consumers over a million dollars in exorbitant fees and interest each day. For people who are still paying off a high-cost loan taken out before the rate cap or looking for a short-term loan in the future, many less costly options are available. A new Resource Guide—developed by Woodstock Institute, New America Chicago, and Heartland Alliance’s Illinois Asset Building Group—connects people to a variety of safe and affordable options, many of which don’t require taking on more debt.
“The predatory lenders have been really effective at promoting the myth that predatory loans will solve people’s money problems,” said Meegan Dugan Bassett, Chicago Fellow at New America. “But those types of loans are a trap that strip money and wealth out of low-income communities. There are a ton of free and lower cost options to help people get out of bad financial situations. We want people to know they have other options.”
The Resource Guide includes four different categories of resources for people who find themselves in a difficult financial situation: help lowering bills; additional income sources; lower-cost loans; and financial coaching. New resources to help people who can’t pay their rent or mortgage, as well as student loans, medical debts, and other major debts are included. In addition, some families may not realize they are eligible for thousands of dollars in Earned Income Tax Credits or the Child Tax Credit this year, or that they are still eligible for thousands of dollars of stimulus checks. Information on free or low-cost financial coaching options from local nonprofits is also included.
For families who still find themselves in need of a loan, Illinois’ Predatory Loan Prevention Act, the name of the new law, means lenders are prohibited from charging over 36% APR for a personal loan. The Resource Guide includes a list of different types of short-term loans that comply with the law. Some lenders, like Capital Good Fund, a nonprofit Community Development Financial Institution, charge well below 36%. Among their various products, Capital Good Fund offers a “Crisis Relief Loan” that carries an APR of just 5%.
“We are so grateful to the advocates and elected officials that made the Predatory Loan Prevention Act a reality,” said Capital Good Fund’s Founder and CEO Andy Posner. “Not only does the 36% rate cap protect families from jaw-droppingly high interest rates and unethical practices, it also makes it easier for those families in need of small personal loans to find organizations like us.”
“Capital Good Fund is ready to step up and service Illinoisians who still require a loan,” Posner added. “We also offer high-quality, one-on-one Financial Coaching that helps consumers build a budget, improve their credit score, create a savings plan, and wipe out debt.”
Based on data collected by the Illinois Department of Financial & Professional Regulation, which oversees the payday, auto title, and installment loan industries, Woodstock estimates that, under the new rate cap, over 1000 consumers are saving over $1.3 million per day in interest and fees on predatory loans.
For more information on the Resource Guide and the Predatory Loan Prevention Act, visit www.woodstockinst.org
For more information about Capital Good Fund, visit www.capitalgoodfund.org