Federal Military Lending Act caps the interest rates for loans to active-duty servicemembers and their dependents at 36%, but recent consumer evidence shows pawn brokers still offering loans with 240%+ interest rate

*Interviews and consumer evidence available upon request*

SPRINGFIELD, 11/3/22 – An Illinois-based pawnbroker made a predatory loan to an active-duty U.S. Navy service member earlier this week, which is prohibited by a longstanding federal law.

This information came to light in the course of an investigation by Woodstock Institute, a consumer protection nonprofit. The investigation was launched after the pawnbroker industry asked the state legislature in May 2021 to give them a carveout from Illinois’s new interest rate cap of 36%.

While the pawnbrokers failed in that effort, in September of last year, they persuaded a judge in Sangamon County Circuit Court to grant them an injunction allowing them to continue charging predatory interest rates. The injunction did not and could not, however, extend to federal law, which has long protected active-duty servicemembers with a 36% interest rate cap on loans.

Woodstock’s investigation uncovered a pawn loan (at left) made Tuesday by an Urbana-based pawnbroker that charged a 243% interest rate for a $200 loan to an active-duty member of the military in violation of the federal Military Lending Act (MLA), which protects active-duty military with a 36% rate cap. During the investigation, the pawnbrokers failed to inquire as to the borrower’s military status in all but two out of 13 instances, strongly suggesting that pawnbrokers have been making predatory loans to active-duty servicemembers for ten or more years. Federal regulators responsible for enforcing the MLA recently found pawnbrokers committing the same such violations in Arizona, Nevada, Utah, and Washington. See CFPB Sues Pawn Lenders for Cheating Military Families (Nov. 12, 2021).

“A loan that charges over 240% is predatory, regardless of who the borrower is,” said state Senator Jacqui Collins (D-Chicago), who was a chief sponsor of the Predatory Loan Prevention Act (PLPA) that became law last year and established Illinois’s 36% interest cap. “But preying on active-duty servicemembers is not only unconscionable, the U.S. Department of Defense deemed it a threat to national security over 15 years ago.”

The PLPA was part of  the Legislative Black Caucus’s “Economic Access Pillar” created in the wake of the events of 2020 that shined a light on racial inequities across the country. There is considerable evidence that predatory lending disproportionately impacts Black, Brown, and underserved communities. See, e.g., High-interest loans in Chicago target Black neighborhoods (Nov. 26, 2021). In 2020, the average income of a payday loan borrower was $37,582 according to data published by the Illinois Department of Financial and Professional Regulation.

A recent poll regarding the impacts of the state interest rate cap shows that by a margin of more than 2 to 1, Illinoisans oppose “exceptions for pawnbrokers.” Eighty-six percent of Illinoisans support the PLPA rate cap. Support for the rate cap is overwhelming across political parties.

“Our investigation strongly suggests that Wednesday’s loan was not an isolated event. We are deeply disturbed by how many soldiers over the past several years have been hoodwinked into getting a predatory loan at an Illinois pawnshop,” said Brent Adams, Senior Vice President of Policy and Communication at Woodstock Institute. “As the former director of the Illinois Department of Financial and Professional Regulation from 2009-2012, I can tell you recovering from the foreclosure crisis made the oversight of pawnbrokers a low priority. After I left, regulatory oversight appears to have effectively stopped in 2016-2017.”

From 2000 to 2016, IDFPR posted enforcement actions against pawnbrokers on the agency’s website, but in response to a Woodstock FOIA request for enforcement actions after 2016, IDFPR stated it was unable to locate any. Also, from 1998 to 2017, IDFPR posted data about the pawn industry. The last such report was posted in 2017, and, based on IDFPR’s response to a Woodstock FOIA request, no reports exist after 2017. The current administration, however, is working to get the system back on track.

“IDFPR shares our concern about how the oversight of pawnbrokers fell off the rails around 2017. No lender in Illinois should be permitted to charge any consumer an interest rate of 243%, but the stakes are especially high when the borrower is tasked with protecting our country,” Adams said.


Woodstock Institute advances economic and racial justice within financial systems through research and advocacy across Illinois and the United States. Among our areas of focus are predatory lending, access to banking, debt collection, and municipal fines and fees.