New Report: State Interest Rate Cap has saved Illinois consumers more than $600 Million

By Editor | January 17, 2024 |

Predatory Lenders’ attacks on the law expected to continue

Woodstock Institute released a new report highlighting the positive impact of Illinois’ Predatory Loan Prevention Act (PLPA) which capped interest rates at 36 percent. Championed by the Illinois Legislative Black Caucus, Illinois passed the PLPA in January 2021 and Governor J.B. Pritzker signed it into law later that year. The law has been under attack by parts of the industry even before it was signed.

Historically, Black and Brown, and lower-income communities in Illinois paid a disproportionate share of the hundreds of millions of dollars in high-cost loan fees drained from the State every year. Before the PLPA, Illinois paid over $500 million in payday and auto title loan interest and fees per year – the fourth highest in the nation.

Post-Predatory Loan Prevention Act Key Findings:

• Most lenders stopped making predatory loans, saving consumers over $600 million in interest and fees.

• In 2019: 1.04 million loans with total fees of $607.4 million;

• During COVID (2020): 637,157 loans with total fees of $383.5 million;

• In 2022 (the first full year after the PLPA took effect): 105 loans with total fees of $1,279.

• Some lenders continued making loans that complied with the PLPA 36 percent percent rate cap, and other lenders that charged 36 percent percent APR or less before the PLPA saw an increase in applications and originations.

• Illinois consumers overwhelmingly support the PLPA and the 36 percent rate cap: 86 percent support, 6 percent oppose

• People who needed access to cash after the PLPA went into effect found more affordable ways to address that need, including ways that did not involve taking on more debt.

• Bankruptcy filings decreased more in Illinois than in any of the other states in the region.

The 14-page report is a compilation of data collected since the PLPA took effect on March 23, 2021. The report also highlights poll results showcasing the overwhelming support for the PLPA and the 36 percent rate cap among Illinois consumers.

Kesha Warren, a small business owner, who took out a title loan in 2019 to support her business is glad the law protects women like her: “Black women entrepreneurs often feel like we’re fighting an uphill battle, but I take comfort in knowing that the PLPA protects women like me from predatory auto title loans.”

“The PLPA represents a massive redistribution of wealth,” said Brent Adams, Senior Vice President of Policy & Advocacy at Woodstock Institute. “The PLPA stopped the hundreds of millions of dollars that were being transferred to the predatory lenders every year from Black, Brown, and lower-income communities.”

Alice Ramey, an 83-year-old retired waitress believes the pawnbrokers should follow the same laws as other consumer lenders and not charge more than 36 percent APR. “At 240 percent, I can barely afford to pay the interest, much less make any kind of dent in the principal. I don’t know what I will do next.”

The report notes that Illinois pawnbrokers continue to charge triple-digit interest rates thanks to a court ruling in September 2021.

Despite the success of the PLPA, Woodstock Institute expects to have to continue to fight off legislative attacks on the law. “PLPA Defense is a day-to-day responsibility for our coalition,” Adams said.

• Woodstock Institute is a leading policy and research nonprofit that advocates for consumer financial protection and community economic development. Our work seeks to combat structural inequities and to improve the quality of life in lower-income neighborhoods and communities of color. Among our areas of focus are predatory lending, access to banking, debt collection, and municipal fines and fees.