(The Center Square) – A report by a nonprofit research and policy organization shows a law capping interest rates has saved Illinois consumers millions.
Woodstock Institute is highlighting the positive impact of Illinois’ Predatory Loan Prevention Act (PLPA) which capped interest rates at 36%. Illinois passed the PLPA in January 2021 and Gov. J.B. Pritzker signed it into law later that year.
The report found that most lenders stopped making predatory loans, saving consumers more than $600 million in interest and fees.
“The PLPA represents a massive redistribution of wealth,” said Brent Adams, Senior Vice President of Policy & Advocacy. “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.”
Opponents of the law said it would have a negative effect because it takes away lending options from those with low incomes and bad credit, and hundreds of lenders would be put out of business.
“Lenders continue to open and/or expand operations in the state of Illinois, so in all of their arguments the data suggests the opposite,” said Adams.
Adams adds that bankruptcy filings decreased more in Illinois than in any other states in the region.
The report notes that Illinois pawnbrokers continue to charge triple-digit interest rates thanks to a court ruling in September 2021.
The Online Lenders Alliance criticized both the report and the Woodstock Institute.
“Since Illinois’ 36% APR cap was signed into law, data and research show that many consumers in that state have suffered from less credit access and being forced into worse options and outcomes because they cannot make ends meet,” said Andrew Duke, CEO of the Online Lenders Alliance in a statement. “The Woodstock Institute has once again issued a report with incomplete and cherry-picked data to take an unearned victory lap on this law.”
In December, the Consumer Financial Protection Bureau sent $6 million in financial relief to consumers harmed by illegal lending practices targeting veterans. Five people and their companies misled veterans and other consumers into selling their pension and disability payments, which is illegal under federal and relevant state law.
