(The Center Square) – As lenders highlight the negative effects of the Predatory Loan Prevention Act, a new poll shows Illinoisans are in favor of the law.
As of March 2021, payday loans in Illinois have an interest rate cap of 36%. The act 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 any principal, fee, interest, or charges related to the loan.”
In a poll commissioned by the Woodstock Institute, 86% of respondents said they support the rate cap.
Lenders had warned that low-income people would have a difficult time accessing credit. The poll said two-thirds of low-income adults were able to borrow money since the rate cap took effect. The poll revealed using a credit card was the most common method of accessing emergency funds.
“I would borrow $500 and pay off the loans early. Had I not, I would have ended up paying $1000 back each time,” Tanekia Smith of Alton, a poll respondent, said. “I support the 36% rate cap because I believe credit should be safe, especially for vulnerable consumers and people who are already struggling.”
As a result of Illinois’ lending cap, some lenders have closed up shop. The head of LendNation said all 26 stores in Illinois closed, calling the state “inoperable territory.” Doug Nickerson warns the act will have a negative effect by taking away lending options from those with low incomes or bad credit.
The Online Lenders Alliance released a survey in February 2022 that it said showed the harmful effects of the PLPA. Officials at the Woodstock Institute downplayed the survey, saying the population they surveyed was limited to their own customers, “hardly a scientific sample and sound group of respondents.”
“I’m convinced some of the predatory lenders have tattoos that say ‘access to bad credit’ because that is their only real argument and they’ve repeated it for decades,” said Brent Adams, senior vice president of Policy & Communications at Woodstock Institute.
Some from Illinois look to expand the lending rate cap nationwide.
“These lenders offer loans that trap working class people in an endless cycle of debt,” said U.S. Rep. Chuy Garcia, D-IL and the lead sponsor of legislation to establish a nationwide rate cap of 36% APR. “Before the passage of the Predatory Loan Prevention Act, the average APR on a payday loan in Illinois was 297%.”
Garcia faces Republican James Falakos and Working Class Party candidate Edward Hershey in the Nov. 8 election.
