By Adam Doster
May 29, 2009
If you’ve been following our coverage of the effort to rein in payday
lending in Illinois, you’ll be familiar with the following timeline. In
2005, the state legislature first regulated these predatory financial
products with the Payday Loan Reform Act. The bill did little to curb
the exorbitant interest rates, but included some important protections
for consumers. However, the act only applied to loans that had to paid
off within 120 days. To circumvent it, many of the same lenders simply
extended their payment schedules beyond that time limit, while
preserving the same levels of interest.

"In the early 90’s they were offering 14-day loans, but they’d roll
you over 12 times, so you’d been in debt for 180 days," Citizen/Action
Illinois’ Lynda DeLaforgue told us last year. "Essentially they just
built in the rollover." Public interest lawyer Tom Geoghegan, who filed
a class action suit last week arguing that these loans violate the law,
echoed DeLaforgue’s point. "It’s actually a grosser violation to lock
people into these long-term agreements than for a shorter period of
time, as they did before 2005," he told us earlier this week. For
instance, the plaintiff in his case took out a $700 loan through
Americash with a 12-month payment schedule and an annual percentage
rate of 365 percent.

These longer-term loans fall under a separate law known as the
Consumer Installment Loan Act (CILA). In 2007, the House Financial
Institutions Committee considered a bill to plug the loophole by
applying the Payday Loan Reform Act to any loan with an interest rate
exceeding 36 percent. The committee ultimately killed the measure, with
several members saying they would rather tackle the issue by reforming

This session, lawmakers had a chance to do just that. But on
Tuesday evening, the industry won out again as the House Executive
Committee rejected Rep. Julie Hamos’ (D-Evanston) SB 1435, which would
have established reasonable interest rate caps and fair finance charges
on these largely-unregulated loans. Eight members of the committee
voted "Present." "It’s a big disappointment for those who have been
working hard on the issue for years," Hamos told us from the House
floor yesterday.

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