Court allows 483% APR Loan to stand despite 36% Illinois Rate Cap
For Immediate Release:
September 25, 2025
Contact:
Robert Mayo | hello@woodstockisnt.org
**Media Interviews Available Upon Request**
ILLINOIS – The Illinois Supreme Court yesterday let stand an Appellate Court’s decision upholding an arbitrator’s decision allowing an out-of-state company to charge an Illinois resident 483% APR to borrow money – more than ten times the State’s 36% rate cap. The Supreme Court declined to take up the case, effectively allowing Illinois residents to be subject to the laws of the state where an online lender does business: in this case Utah.
Utah is considered the Wild West in the world of consumer lending. Predatory lenders set up shop there to enjoy the state’s lack of an interest cap. By contrast, consumers in Illinois are protected – or were meant to be protected – by the Predatory Loan Prevention Act (PLPA) – which caps the interest rate on consumer loans at 36%.
In this case, Silver Financial, a company doing business in Utah, made a loan to Joseph Morgan, an Illinois resident, with an APR of 483% in April 2022. Under the PLPA, that APR is illegal, and the loan is null and void on its face. Silver Financial was able to get away with charging whatever it wanted through two legal mechanisms: (1) forced arbitration, and (2) choice of law. “Forced arbitration” is fine print buried in a contract forcing you, the consumer, to take any disputes to arbitration, instead of court. “Choice of law” means the company gets to choose which state’s laws apply. In this case, the company chose…. You guessed it… Utah!
On June 30, 2023, an arbitrator found that the PLPA and the public policy of Illinois were inapplicable, and the Illinois Appellate Court for the 1st District, on February 4, 2025, affirmed the arbitrator’s decision, finding that applying Utah law did not violate the public policy of Illinois.
“It has long been common knowledge that you don’t forfeit your rights when you log on to your computer and shop on the internet, but like so many other things these days, a new normal is descending upon us,” said Brent Adams, Senior Vice President of Policy & Advocacy at Woodstock Institute. “The implications of this decision are not confined to consumer lending. We are routinely forced to sign arbitration clauses when deciding to receive goods or services from a particular company; cell phone service, internet, and credit cards, in addition to loans, are among the types of industries that use forced arbitration clauses. We are all at risk of being subject to an arbitrator who will enforce a ‘choice of law’ clause drafted by a company who wants to stack the deck in its favor.”
Illinois is not entirely powerless in this situation. The Illinois Department of Financial & Professional Regulation (IDFPR) issued a cease & desist order on May 19, 2025. Silver Financial had ten days to request a hearing and refused to do so. If Silver Financial is still offering loans to Illinois consumers, the Attorney General’s Office may go to court seeking an injunction to enforce IDFPR’s order.
Today, Mr. Morgan’s attorneys filed a Petition for Rehearing with the Illinois Supreme Court noting that IDFPR’s order is in direct conflict with the Appellate Court’s decision.
Meanwhile, this coalition is working with policy experts to develop state laws to stop forced arbitration. Another possible reform is to create a Restitution Fund funded by fines paid by other licensees. The Restitution Fund would be used to pay restitution to consumers who are harmed by financial predators who fall outside the State’s reach.
Unfortunately, the final takeaway is buyer beware. When you buy a good or service or borrow money over the internet, you are taking a risk. If something goes wrong, you might find yourself in arbitration with an arbitrator selected by the company applying the laws chosen by the company. The laws could be the laws of Utah, the Virgin Islands, Isle of Man, or China, and, if you lose, you might have no remedy or recourse.
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