CHICAGO, June 24 /PRNewswire/ -- AboutPaydayLoan.com - Governor of Illinois, Pat Quinn, today signed Illinois House Bill 537 into law which puts a cap on payday loans and curbs payday lending. Under this new law, interest rates payday lenders charge will be capped at 99% for loans under $4,000 and 36% for loans greater than $4,000.
The monthly gross income of a payday consumer in Illinois is about $30,460 per year . Only 4% of payday day loan customers make more than $70,000 per year.
In a statement Pat Quinn said:
"Many consumers who take out short-term loans are doing so as a last resort to pay their bills and provide for their families. It is all too easy for lenders to take advantage of them by raising interest rates and setting very short repayment periods. It is important that we do everything we can to protect these consumers who are already hurting, by helping to make these loans more affordable."
Here are some of the highlights of the Law
- Loans and their amount should be approved only based upon the borrower's ability to repay the loan.
- Consumers are to be given monthly payments that does not exceed 22.5 percent of their gross monthly incoming.
- Customers have at least 6 months to pay back the loan term. This is a 2 months increase from previous four months term.
- "Balloon Payments" which are payments that prevent lenders from penalizing borrowers for early pay offs will also be banned.
As an advocate for responsible payday lending, About Payday Loans welcomes these new regulations to help end predatory lending. Nevertheless, About Payday Loans would like to encourage law makers to not only introduce caps and laws to regulate the payday loan industry, but to also teach consumers better monetary habits so they can avoid payday loans altogether. Regulating the payday loan industry with interest caps, along with creating a learning environment, promotes responsible lending, it is the most optimal solution, so that good payday advance lenders and trusted payday lenders can continue doing business as usual. After all, many of these lenders are legitimate businesses that provide jobs, pay their taxes, and contribute to the economy.
Continuous education of payday loans to the consumer should also be on the agenda. Remember, knowing is half the battle. Moreover, the finger should not always be pointed at payday lenders for financial problems this country is facing, consumers who take unnecessary loans for amounts they cannot afford should also be held responsible. There are plenty of payday loan resources out there, such as payday loan blogs, that consumers can read to help them determine the risks of payday advance loans, and when it's a good time, and not a good time, to apply for a personal payday loan.