The Catholic Conference of Illinois today joined over 100 social justice organizations in calling upon Gov. J.B. Pritzker to sign into law the Predatory Loan Prevention Act as embodied in Senate Bill 1792.
The legislation caps the annual percentage rate (APR) on payday and car title loans at 36%. This fact sheet tells the grim story of these loans: Current APRs – which is the cost of borrowing money, including the interest rate and any fees – on these loans can reach 297% and 179%, respectively. Illinois families pay over $500,000,000 per year in payday and car title loan fees – the fourth highest in the nation. Meanwhile, nearly half of all Illinois borrowers of payday loans earn less than $30,000 annually. Currently, 17 states and the District of Columbia cap interest rates on these consumer loans at 36%.
Senate Bill 1792 received overwhelming bipartisan support in the recent lame-duck session of the Illinois Legislature focused on the Black Caucus’ agenda. The legislation passed the Illinois House on a 110-0 vote, with 2 voting present, and passed the Senate on a 35-9 vote.
In a letter sent today to the governor, the organizations ask for his signature on the legislation, poignantly describing the harrowing impact current high interest rates have on borrowers:
“Payday lenders target people who need cash, which has colossal consequences for the borrower. These consequences begin immediately and typically last for months, if not years. Payday lenders make loans to customers without determining their ability to repay the loan in full. Instead, the lender siphons loan payments out of the borrower’s bank account on their paydays. This forces borrowers to skimp on other necessities like health care and prescription drugs. The lender then capitalizes on this predicament by rolling over, refinancing, or extending the loan repeatedly. This puts borrowers in a burdensome cycle of debt.
“Nationally, research by the Consumer Financial Protection Bureau shows that the majority of payday loans are borrowed by consumers who take out at least 10 loans in a row. In Illinois, the average APR on a payday loan is 297%. This is not “access to credit”; this is predatory lending.
“Auto title lenders are another culprit, digging everyday people in already dire financial circumstances even deeper into debt. In Illinois, these loans come with interest rates as high as 360%, costing families thousands of dollars in interest and fees. On top of high interest rates, when a borrower can’t afford to repay these costly loans, they lose their car – a lifeline that allows people to work, take their children to school, and meet many other daily needs.”
The Catholic Conference urges Gov. Pritzker to sign SB 1792 into law.