Neighborhood webhome. Neighborhood Quality
Payday loan reform
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Latest: the Payday Loan bill (see below) has passed and the governor has signed it. Signs in the lenders' windows tell of changes made July 1 due to the law. In July the governor also signed a law barring predatory home lending. The law, which went into effect December 7, limits loan total to $15,500 and loans outstanding per customer to two--enforced by an approval database.
No, Rep. Currie tells us, it's not over yet--the payday lenders have invented new wrinkles that have to be revisited.
"Payday loans" have been an issue of concern both to the Conference and to Alderman Preckwinkle since the first store devoted solely to this business opened in the 1500 block of east 53rd Street in the late 1990s and research showed how easily borrowers got or got themselves trapped into rolling over loans with tens to hundreds of percent interest that they could not get out of. While realizing such lenders serve persons banks and other institutions cannot or will not, the Conference and the the alderman's office distributed informational brochures calling attention of customers to the rates and dangers they could be getting themselves into.
There is a perceived to be a major loophole in legislation, Illinois has no interest cap or usury law and is one of only 14 states that do not effectively regulate terms of payday loans. State Senator Obama worked with the state's regulatory body to get some rules in place. Legislators believe these are insufficient, so in 2005 a high-gear effort was made to pass reasonable legislation. State Senator Kwame Raoul (D-13) introduced SB1100 to tackle the issue. 1100 is also named the Monsignor J. Egan Payday Loan Reform Act.
A bill to regulate and set terms of operation for payday loan companies, 1100 still stands a good chance for passage--but faces what supporters call a sheep's-clothing ploy to lower the interest the businesses can charge: this would be a bill-killer for the compromise. For information on the proposed terms and petitions contact the 5th Ward Office at 773 324-5555. Senator Kwame Raoul wrote in the May 4 Herald that SB1100, of which he is chief co-sponsor, would cap interest rates by payday lenders and limit these loans to one quarter of monthly gross income.
What supporters say the bill does:
Borrowers profile according t Citizen Action Illinois and Woodstock Institute.
24 million Americans have used payday loans
These are generally: credit constrained, and/or working but low-income, ...young female head of household, African American, renters--but many homeowners also.
Credit constrained: 3 times more likely to be debt burdened or been denied credit in past 5 years. 70 percent have other types of consumer debt.
Core market is credit-constrained households with checking accounts and steady income.
Generally employed blue or gray collar in mid career (under 45 years old),
Low income. 23% under $25,131 or 40% of Illinois median.
62 percent female, 62% have children living at home.
African American households 2.5 times mores likely to use than white and the lenders are more prevalent in AA communities.
75 percent of borrowers are renters in Illinois, 64% in Wisconsin