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New Bill Crushes Title Loans and Other Predatory Lending

New Bill Crushes Title Loans and Other Predatory Lending

Early on in January, Illinois lawmakers introduced House Bill 5871, or the Economic Equity Bill. This bill covers a lot of different areas. It aims to create new laws related to employment background checks, lead water pipes, and reparations for the slave trade. The area that we want to talk about is the section on predatory lending.

Before we talk about how the bill aims to deal with predatory lending, we do want to point out that this is just a bill at this stage. It is not currently a law.

We do not know if it will eventually become law. It was introduced when the Illinois General Assembly was in their post-election lame-duck session. This means that many of the lawmakers that discussed the bill are now out of the picture.

The bill has not been discussed since the new General Assembly was sworn in. There is a chance that it may come back, but it may be completely different.

How Does the Economic Equity Bill Tackle Predatory Lending?

The Economic Equity Bill attempted to put a cap on the amount of interest that title loan and payday lenders can charge their borrowers.

The cap would be set at 36% per year. In real terms, this would mean that a borrower would have to pay back a maximum interest of $1.38 for every $100 that they borrowed. This is a stark contrast to most payday loans where it is not uncommon to be paying 10x this amount in interest.

It was hinted that the idea of this law wasn’t really to limit the amount of interest that borrowers would be paying. Instead, the law was introduced to try and make it pretty much unaffordable for a payday lender to operate. After all, no title lender will be willing to take a risk if they could only earn back $1.38 for every $100 that they lent out. Many payday lenders said as such when the bill first started to be discussed.

You can think of the Economic Equity Bill as a way to rid Illinois of predatory lenders completely. Whether this is a good or a bad thing is up to you to decide. It was certainly a hot topic when the bill was being debated.

When the bill was going through the debate stage, some title loan companies such as Midwest Title Loans were coming out in droves saying that they would not be able to offer their loan products if the law eventually came to fruition. While other title lenders such as Titlelo Title Loans welcomed the change. Since the General Assembly changed before the bill could be properly voted on, the discussion ended there.

What Is the Future of the Economic Equity Bill?

At the moment, it is unknown.

As with most bills introduced in lame-duck sessions, the Economic Equity Bill existed to show an agenda for the General Assembly. They likely knew it would never have become law.

Near the end of the session, however, the bill was broken down into several smaller bills. This meant that the predatory lending aspect became its own bill. This still exists. Splitting off the bill into a small bill does show that there is some sort of intention for it to be introduced into the law in the future. We cannot possibly tell you when, but the intention is there.

A lot of research will likely need to be carried out before we see any laws related to predatory lending introduced, though. The whole idea of the bill was to try and force payday companies out of business without directly shutting them down. This is an uphill battle.

Honestly, you should not expect there to be any new major regulations towards the lending industry any time soon. If this bill does come back for discussion, expect the regulations on the predatory lenders to be a bit looser than in the original bill.

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by Brian Perry // Brian Perry is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.