Predatory Lending Protection

Predatory
Lending Protection

Woodstock Institute is committed to safeguarding consumers from predatory lending practices that drain wealth from individuals and communities. In 2021, these efforts achieved a vital win with the passage of the Illinois Predatory Loan Prevention Act.

The Predatory Loan Prevention Act (PLPA) protects Illinois communities by capping interest rates on consumer loans, including payday and auto title loans, at 36% APR. This ensures borrowers are not burdened with exorbitant fees and charges that can trap them in a debt spiral. The law provides an essential safeguard against exploitative lending practices that often target low-income individuals and communities of color.

Woodstock Institute High Loan Fees in IL 2019-2022

Thanks to the 36% cap, millions of dollars that would have gone to predatory lenders in the form of interest and fees have remained in Illinois communities. Woodstock found that consumers saved $607 million in fees and interest on high interest loans in 2022, an almost 100% decline from 2019.

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The Predatory Loan Prevention Act is Working

Our most recent and comprehensive report examining Illinois’s 36% rate cap looks at how the PLPA has impacted the State’s consumer loan market, including by saving consumers millions in interests and fees, reducing bankruptcy filings, and expanding access to affordable lending options. We also find Illinoisans overwhelmingly support the rate cap at 86%.

Woodstock Institute Consumer Interest Rates Before and After PLPA

The “Pawnbroker Loophole”

Unfortunately, passing the PLPA was only part of the battle. The pawnbroker industry successfully persuaded a Sangamon County Court judge to grant them a temporary injunction that exempts the industry from the PLPA’s 36% rate cap and allows them to continue making loans at rates as high as 243% APR. The industry also managed to defeat a bill that would have closed this “pawnbroker loophole.”

In response, Woodstock Institute worked to stop these efforts to ensure all consumer lenders comply with the State’s 36% rate cap. We published research showing how unchecked rates on pawn loans contribute to the wealth gap, garnered the support of responsible lenders, and highlighted pawnbrokers’ predatory lending practices.

Update: In November 2023, the Illinois Senate unanimously passed HB 779 (“Pawnbroker Regulation Act of 2023”) to address Illinois pawnbroker regulations. While HB 779 still allows pawnbrokers to lend at predatory triple digit interest rates, the bill does contain some positive reforms. Because the bill is such a mixed bag, Woodstock’s official position was “No Position.” Learn more.

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