After nearly six years of campaigning, consumer advocates are finally reaching a hard-earned victory for Payday Loan Reform.
Senator Kimberly A. Lightford (D”Maywood) passed a bill last Thursday that would protect the consumers and create a regulated environment for the short-term loan lenders in Illinois.
Before the bill, the average finance charge for several Payday Loan stores in Forest Park and Oak Park was $48 per $100 borrowed”nearly half of the loan itself.
However, the bill now places a maximum fee cap of $15.50 per $100 borrowed.
“It’s been a long and arduous process,” said Senator Don Harmon (D”39), co-sponsor of the bill. “I’m hopeful that in the end, we struck a balance and we will protect the Illinois families that need to turn to short-term loans to get by.”
Some of the other consumer protections in the Payday Loan Reform bill include a mandatory recovery period to allow consumers to easily break out of the debt cycle created by back-to-back loans.
“I think the key element that makes this bill work is the repayment plan,” said Dr. Marva Williams of Woodstock Corporation, a long-time proponent of the Payday Loan Reform campaign.
The bill implements a repayment plan that allows 56 days for customers with loans unpaid for more than 35 days to pay the loan without any additional fees or interests.
The payday loan reform bill, also known as House Bill 1100, is the result of years of work by legislators, consumer advocates and major payday lenders.
“I and other members of the General Assembly have worked hard on this bill to bring both sides together, to reach a solid compromise that both sides could agree to,” said Lightford, in a state-wide press release.
Be advised, however, said Bob Vondrasek, executive director of the South Austin Coalition, because even though the bill installs consumer protections, the lending industry is still not the best option for consumers.
“It’s a very risky short-term loan,” he said. “I would still advise people against it.”