The Predatory Loan Prevention Act (SB 1792 – PLPA), currently awaiting Governor Pritzker’s signature, which establishes a 36% interest rate cap on consumer loans in Illinois, will mean more jobs for Illinois and more money back in the hands of the people who need it most.

These are among the findings of a just-released report by the Woodstock Institute, a nonprofit research and policy organization that focuses on fair lending, wealth creation, and financial systems reform.

Woodstock’s report assesses the PLPA’s impact on Illinois’ economy and refutes claims by the legislation’s opponents that the new law will cost the state jobs. Based on an analysis of the total fees paid in 2019 by Illinoisans on payday loans, installment payday loans, and auto title loans, Woodstock projects the law will create 5,673 jobs, a net gain over the jobs critics claim will be lost. The report says that the 36% rate cap the legislation places on payday loans will also save borrowers more than $400 million. That’s money that borrowers will be able to spend on goods and services instead of predatory loan interest and fees, shifting the jobs from those supported by predatory lending to those that provide other goods and services to the community.

“The predatory loan industry has drained billions of dollars from Black and Brown communities,” said Brent Adams, senior vice president of Policy & Communication at Woodstock Institute. “Key to combating structural inequity and stimulating the local economy is putting more money in people’s pockets.”

The report references an analysis by the Economic Policy Institute that explains both the direct and indirect impact on jobs resulting from increases in consumer spending. As consumers spend more, businesses need to hire more workers, especially important as the state begins to recover from the pandemic shutdowns. The indirect job impact comes from businesses’ purchasing more supplies to meet the increased consumer demand.

Also, because people living in communities of color pay over 2.5 times as much per capita in fees as people living in majority White communities, the savings and job creation from the 36% rate cap should disproportionately benefit Black and Brown communities.

Based on the savings for fees paid for payday loans, installment payday loans, and auto title loans to both in-state and out-of-state lenders, the impact could be $638 million to more than $835 million.

For example, business owner Kesha Warren took out a $1,250 auto title loan to pay her contractors in December 2019 from a lender based in Georgia (see her story on WTTW Chicago Tonight). The APR on her title loan was 197.64%, which amounted to $4,211.10 in fees. If the interest and fees on the loan had been capped at 36%, she would have been required to pay only $570 for the same $1,250 loan, a savings of over $3,600. The interest and fees that Kesha had to pay for her title loan was money that she could have used instead to hire more workers or pay existing employees for additional hours, directly creating and expanding jobs.

In short, the report states that the PLPA is both a jobs and a racial equity bill. For the complete Economic Impact and Jobs Creation report click here


About Woodstock Institute

Woodstock Institute is a leading nonprofit research and policy organization in the areas of fair lending, wealth creation, and financial systems reform.  Woodstock Institute works locally and nationally to create a financial system in which lower-wealth persons and communities of color can safely borrow, save, and build wealth so that they can achieve economic security and community prosperity.