(The Center Square) — As lenders point to the negative effects of the Predatory Loan Prevention Act, a new poll shows Illinois backing the law.
As of March 2021, payday loans in Illinois have an interest rate cap 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, a survey respondent. “I support the 36% rate cap because I think that credit should be safe, especially for vulnerable consumers and people who are already in difficulty.
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 which it claimed showed the adverse 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 that 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 that for decades,” said Brent Adams, senior vice president of policies and communications in 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 U.S. Representative Chuy Garcia, D-IL and the lead sponsor of legislation to establish a national rate cap 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.
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