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Wednesday, June 4, 2008 01:39 am

Still trapped

Payday lenders escape tougher regulations for the time being

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At least until the Legislature reconvenes in November, or Gov. Rod Blagojevich calls lawmakers back to Springfield for special meetings, Illinois residents will still be able to take out high-interest payday loans that many consumer-rights advocates deem predatory. Passed unanimously by the Senate in April, a bill that sought to strengthen the state’s payday-lending regulations remained in the House’s Rules Committee as the General Assembly adjourned on May 31. Although the inaction may be a boon for the state’s payday-loan operators in the short term, Steve Brubaker, spokesman for the Illinois Small Loan Association, says he isn’t pleased with the outcome.  “We thought that we were on a path to a negotiated settlement,” he says. “We worked in good faith and put in a lot of hours. When it got to the end, Rep. [Julie] Hamos came in with a new piece of legislation that no one had seen before and said, ‘Take it or leave it.’ ”
Illinois’ current payday-lending law, passed in 2005, limits the amount customers can borrow, as well as how much lenders can charge in fees. But not long after the measure went into effect, some lenders exploited a loophole and began issuing loans of 121 days, which is legal under the Illinois Consumer Installment Loan Act [see R.L. Nave “The payday-loan trap,” April 10]. The new bill removes language that defines a payday loan as a loan with a term shorter than 120 days. Hamos, an Evanston Democrat, says the legislation does not address the real problem of the CILA, which contains no safeguards against predatory lending and, she says, allows payday-loan companies to “do whatever they want to do.”
She adds that the time to make necessary fixes to the bill simply expired. “This issue was put in my lap four weeks before the end, and the underlying bill did not solve the problem,” Hamos says. “The problem was to address CILA, and there was not enough time to move forward with anything that would pass.”
Brubaker and Hamos say they plan to continue working on the issue through the summer. A key sticking point will be the issue of limits on annual interest rates. Hamos, who says that some lenders charge annual percentage rates of as much as 1,000 percent, wants to cap interest at around 36 percent per year. Brubaker believes that figure is too low but says his group is willing to negotiate.
But Hamos is confident the two sides can find some common ground: “Somewhere between 36 percent and 1,000 percent is the challenge.”  

Contact R.L. Nave at rnave@illinoistimes.com.
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