SB 1435 defined within the Consumer Installment Loan Act a “small consumer installment loan” with a principal of $4,000 or less and interest rates below 99% APR. The Act also closed a glaring loophole in the Payday Loan Reform Act, which has allowed lenders to evade guaranteed consumer protections, by limiting interest rates to 36% APR on loans above $4,000. Additionally, the Consumer Installment Loan Reform Act would have capped monthly payments for a “small consumer loan” at 20% of the borrower’s monthly income and required lenders to report loan information into a consumer database for purposes of determining borrower eligibility.
“Following a year of good-faith negotiations, the Governor’s Office, Attorney General’s Office, and the Egan Campaign successfully won the support of all the major installment lenders in Illinois, as well as half of the payday lending industry represented by the Community Financial Services Association,” said Lynda DeLaforgue of Citizen Action/Illinois. “However, the portion of the lending industry, which philosophically opposes reasonable rate caps, soundly defeated the pro-consumer proposal in the Executive Committee last evening.”
“Last night’s devastating defeat means that working families in Illinois for at least another year will be preyed upon by high-cost, long-term loan products, which trap borrowers’ in an endless debt cycle,” said Suzanne Strassberger of Metropolitan Family Services. “Due to the inaction of the House Executive Committee, consumers will continue facing loans with interest rates ranging upwards of 1000% APR without any consumer protections.”
“The Illinois House Executive Committee voted with a small, but well-connected segment of the lending industry – maintaining the status quo,” said William McNary of Citizen Action/Illinois. “The working families of Illinois, who are currently trapped in triple-digit interest rate loans, lost today, but their time is coming. We are confident that with the support of a strong consumer coalition, including State Representative Hamos, State Senator Lightford, Governor Quinn, Attorney General Madigan, and major segments of the payday and installment lending industries, consumers will prevail. We urge five more members of the Executive Committee to vote for the bill and give their colleagues an opportunity to vote.”