Illinois Considering Small Loans Bill, Reports AboutPaydayLoan.com

LOS ANGELES, July 30 /PRNewswire/ -- As our payday loan states article published on June 21st reported, Illinois governor Pat. Quinn, signed State Law HB 537, which is a bill that supposedly closes a loop hole in that State's 2005 Payday Loan Act. That bill had passed the general assembly unanimously back in May. This law also prevented taking installment loans , which is similar to payday loans except that the terms are not defined.

This regulation also regulated payday loans in that State that imposes a 99 percent APR cap on the loans and all loans must be under $4000. As the result many payday lenders have downsized the business and some have even closed because that cap is simply not profitable for them.

99 percent APR sounds like a high interest rate, but it is fundamentally wrong to cap APR, which stands for Annual Percentage Rate, on a short term loan such as a payday loan that is due in two weeks or less.  Payday lenders usually look at their loans' interest rates as fees just like an overdraft fee, except that payday loans' fees are much less than overdraft fees.

According to payday lenders downsizing, the demand of small loans are on the rise in that State.  As a result the State is considering and weighting a "small loan bill" which enables banks and credit unions to provide the same type of short term loans with less fees and interest rates.

The way the bill seems to work is that State banks will be contributing funds to a "small loan pool" controlled by a State Assembly. From that loan pool, State will give loans directly to needy families with low fees and interest rates. Banks will get tax right offs at the end of the year from the State and also will clear and improve their image with their customers.

Many critics of this bill are worried that this will add more to State governments' bureaucracy, which in the end could cost the State taxpayers.

SOURCE AboutPaydayLoan.com