Four years ago, lawmakers and consumer advocates approved legislation aimed at reforming the payday loan industry in Illinois and keeping people from falling into too much debt.
They capped the interest rate on the short-term loans and limited people from having more than one loan at a time.
But advocates say even more changes are needed. While that law in 2005 capped some short-term loans, others, called consumer installment loans, weren’t.
Now, consumer advocates want the rates of those loans capped too, and they want other similar reforms to limit the amount of debt a person can take on.
“What I’m worried about is that they’ll find another loophole,” said state Rep. Julie Hamos, D-Evanston.
The industry’s position
The industry, though, doesn’t agree that their methods fall into a loophole, and they say they need high rates on short-term, high-risk loans in order to make money.
They largely agree with many of the reforms consumer advocates suggest, said Steve Brubaker, a spokesman for the Illinois Small Loan Association. For example, he said, the industry supports a database to assure people don’t have more than one short-term loan at a time and rules that limit how much you can borrow based on your income.
“That helps keep the debt down, manageable,” Brubaker said.
What they oppose, though, are caps on interest rates for the loans. There isn’t much common ground between consumer advocates and the industry on this point, Brubaker said.
Capping rates at too low a level could put some of the lenders out of business, said Americash CEO Jill Gruchot.
“When you put us out of business, where are these consumers going to go?” she said.
Emotions on the issue can run high. Consumer groups held a packed news conference in Springfield last week that included a contingent from Decatur. Speakers were occasionally greeted with applause.
Bruce Williams, a member of Decatur Central Christian Church, said the debt can be crippling.
“It’s another means of enslaving people,” he said.
Though she wants to cap rates, Hamos says she doesn’t want to shut down the industry. She said she understands some people run into situations where they need cash in a hurry, despite the interest rates.
Lawmakers have the rest of the month to figure out if there’s a middle ground.
“It’s still going to be pretty tough,” Hamos said.
story source
