Illinois is now better off with no payday lenders
A year ago, Illinois’ Predatory Loan Prevention Act went into effect, imposing a 36% interest rate cap on consumer loans. I was one of the lawmakers who fought hard to enforce this rate cap. Payday lenders charged interest rates in excess of 300%. Low-income people who needed cash to cover an emergency often felt they had no other choice. It was a business model that thrived on desperation and thrived on adversity.
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But when we debated this idea, its opponents – the predatory lending industry – said that the interest rate cap would cut off people from the credit they needed. They claimed that if payday lenders couldn’t charge that interest, they’d have to close their doors and poor people had nowhere to go for quick cash.
As we approached the first birthday of the law, I asked myself: What actually happened? Has the sky really fallen? I decided to look at the numbers.
It turns out that almost all of the payday and title lenders left the state after the passage of the PLPA. I think their business model just can’t work if they don’t charge outrageous interest rates.
But that didn’t mean that low-income people lost access to credit. In effect, this meant they had access to better, cheaper credit products.
Since the law was passed, the Illinois Department of Financial and Professional Regulation has licensed 46 companies to provide installment loans at rates below 36%. Some of these lenders have interest rates as low as 6% to 8% depending on the borrower’s creditworthiness.
Capital Good Fund, a national organization that provides equitable loans to low-income families, reports that in the days following the passage of the PLPA, they saw a nearly 70 percent increase in Illinois customer applications and new loan originations.
“As predatory lenders close their doors,” said Andy Posner, CEO of Capital Good Fund, “families will look for other options.”
Indeed, that is exactly what happened in Illinois. The PLPA created a void as predatory lenders left. And that gap has been filled by better lenders who comply with the law but can still make a profit and serve the low-income more fairly.
As a result, Illinois consumers saved hundreds of millions of dollars in fees and interest in the first year of the law.
It’s expensive to be poor in America. But a year ago we made it a little cheaper here in Illinois. And we will continue to fight in Springfield to help people get back on their feet without being taken advantage of.
Will Guzzardi, State Representative, 39th District
Strengthening the power of working people
The WTTW’s recent notification to striking workers that their employer-sponsored health insurance will be terminated effective April 1 is further evidence of the need for a national health insurance program for the United States.
The WTTW uses these anti-union bullying tactics in its attempt to further widen the gap between working people and wealthy donors and executives. Single-payer government health insurance, while not enough to end union busting or fill this gap, would empower working people, reduce inequality, and vastly improve the lives of all of us.
Anne Scheetz, MD, Logan Square