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Payday Reform Expected To Pass House

By aaroncynic in News on May 11, 2010 7:00PM

Photo by Mark Mullis
The Illinois Legislature is closer to passing reform to the Payday Loan Act and the Consumer Installment Loan Act, which would close loopholes that have allowed some of the more predatory practices of lenders. Crain’s reports the Consumer Installment Act is expected to be amended to impose a cap of 99% on consumer installment loans under $4,000. The Payday Loan Reform Act will be amended to increase terms of loans to six months.

Lynda DeLaforgue, co-director of Citizen Action Illinois celebrated the legislation, which is expected to pass the House when lawmakers come back later this month saying “We will for the first time have set rates on these unsecured loans made to the most vulnerable borrowers.” Payday loan businesses have come under fire for charging incredibly high interest rates and preying on lower income people. Predictably, one of Illinois’ biggest lenders, PLS Financial Services was displeased and are reportedly considering moving their headquarters out of state.

While the Payday loan industry might bemoan the measure, the bill itself is a more moderate compromise. According to Progress Illinois, a 99% is still high by conventional standards. In addition, limits set by the 2005 Payday Loan Act, such as charging no more than $15.50 per $100 loaned in a two week period remain the same.