Simply put, we believe that frequent borrowing at extremely high interest rates is usually not the result of emergency credit needs but, rather, the result of long-term financial instability. While opponents of payday loan regulation claim that any restrictions on the industry will prevent low-wealth people from fixing their cars and getting to work, a recent survey indicates otherwise. Only five percent of people using payday loans need to money for car repairs. The majority of borrowers use them to meet basic living expenses and make up for lost income. With thousands of Illinois households struggling with unemployment, unregulated credit options known to cause an expensive cycle of debt are simply unacceptable.
In Illinois, a state that industry observers have claimed would roundly reject any rate restrictions on payday loans, we have worked with consumer groups, policymakers, and lenders alike to agree on strong consumer protections that keep will keep the payday product from exacerbating Illinois residents’ financial instability. We believe this new law will do so, by limiting the cycle of debt, ensuring that loans are based on a borrower’s ability to repay the loan in full, and giving regulators the tools they need to enforce the law.
Championed by Sen. Kimberly Lightford (D-4), Rep. Lou Lang (D-16) and Attorney General Lisa Madigan, the law passed the General Assembly in May with nearly unanimous, bi-partisan support. After a decade of research, policy development, and negotiation, we are confident that the protections in this law will eliminate the worst industry abuses and we thank Governor Quinn for his support.