As lenders point to the negative effects of the Predatory Loan Prevention Act, a new poll shows Illinois supports the law.
As of March 2021, payday loans in Illinois have a cap rate of 36%. The law provides that any loan made in excess of 36% is considered null and void, and no entity has the “right to collect, attempt to collect, receive or retain principal, fees, interest or loan costs. ”
In a survey commissioned by the Woodstock Institute, 86% of respondents said they supported price caps.
Lenders had warned that low-income people would struggle to access credit. The poll says two-thirds of low-income adults have been able to borrow money since the rate cap came into effect. The survey found that using a credit card was the most common method of accessing emergency funds.
“I would borrow $500 and pay off the loans sooner. If I hadn’t, I would have ended up paying back $1,000 each time,” said Tanekia Smith of Alton and a survey respondent. “I support the 36% rate cap because I believe credit should be safe, especially for vulnerable consumers and people who are already struggling.
Due to the Illinois lending cap, some lenders have gone out of business. The LendNation chief said all 26 stores in Illinois were closed, calling the state “inoperable territory.” Doug Nickerson warns that the law will have a negative effect by removing loan options for people with low incomes or with bad credit.
The Online Lenders Alliance published a survey in February 2022 claiming to show the harmful effects of the PLPA. Woodstock Institute officials downplayed the survey, saying the population surveyed was limited to their own customers, “barely a scientific sample and a solid group of respondents.”
“I’m convinced some of the predatory lenders have tattoos that say ‘access to bad credit’ because that’s their only real argument and they’ve been saying it for decades,” said Brent Adams, senior vice president of policy. and communications at Woodstock. Institute.
Some in Illinois are looking to extend the lending rate cap nationwide.
“These lenders are offering loans that trap working-class people in an endless cycle of debt,” said Congressman Chuy Garcia, the main sponsor of the legislation to establish a national cap rate of 36% APR. . “Before the passage of the Predatory Loan Prevention Act, the average APR for a payday loan in Illinois was 297 percent.”
Garcia will face Republican James Falakos and Working Class Party candidate Edward Hershey in the Nov. 8 election.