‘We can stop sinking’: Lawmakers celebrate anniversary of Illinois breakup with payday loans


SPRINGFIELD, Ill. (NEXSTAR) – Legislatures on Wednesday celebrated the one-year anniversary of the passage of the Predatory Loan Prevention Act (PLPA).

The PLPA sets a legal maximum interest rate for consumer loans of 36%. The bill, which was part of the Legislative Black Caucus’ economic justice agenda, passed both houses in January 2021. Governor Pritzker signed the law into law on March 23, 2021.

Before the law went into effect, the average interest rate on payday loans in Illinois was 297% on an annualized basis. For example, a person taking out a $500 loan at an APR of 297% would have to pay a total of $1,485 over 12 months, or $623.75 if they paid it all off in just one month.

According to the Center for Responsible Lending, several border states have higher average APRs: Missouri’s 527% APR and Wisconsin’s 516% APR are among the highest in the US. Still, Illinois residents paid over $500 million in payday and title loan fees per year, the fourth highest in the United States.

Representative Sonya Harper (D-Chicago) knows firsthand how hard it is to avoid post-borrowing debt with a payday loan. As a single mom raising children, she went to a mall for a payday loan when bills began piling up. Harper says she had to give up a month of no income just to catch up.

“If I didn’t do that right there, my bill would keep growing and growing,” Harper said.

She is glad that other families have better opportunities to alleviate financial crises.

“No other family should be able to get into that kind of debt that they can’t get out of and that takes away the salary they go to work for,” Harper said.

Robber loans have disproportionately hit Chicago’s Black and Brown neighborhoods.

State Senator Cristina Castro (D-Elgin) said residents in Latino neighborhoods are twice as likely to receive payday loans as residents in white neighborhoods. Rep. Harper says residents of the predominantly black Austin neighborhood are 13 times more likely to have a payday loan than residents of the predominantly white Lincoln Park neighborhood.

“Because of predatory lending, economic development in our communities has been like trying to sail with a hole in the boat,” said Sen. Jacqueline Collins (D-Chicago). “With the PLPA, we can stop sinking and invest more in our families and communities.”

Another group often targeted by payday loans are veterans. While the Federal Military Lending Act protects active-duty members from loans earning more than 36% interest, it does nothing for reserve members, veterans, or Gold Star families.

“Now all the protections we wanted for the full suite of those who serve our nation and who deserve our protection are in place,” Colonel Paul Kentwell, the executive director of the Rule of Law Institute, said. “That is a fabulous achievement.”

The Woodstock Institute, a nonprofit group that champions consumer finance, championed the bill and celebrated its anniversary.

“Affordable lenders are expanding, and more and more families are meeting their financial needs without taking on more debt,” said Brent Adams, senior vice president at the Woodstock Institute.

The Woodstock Institute was founded for Illinois residents in a financial crisis WeProsperILa website with guides on how to pay bills while avoiding high-interest loans.


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