Woodstock Institute Highlights Benefits of Predatory Loan Prevention Act
The Woodstock Institute sent an email highlighting the benefits of a new law in Illinois — the Predatory Loan Prevention Act.
In the email, Woodstock notes:
Comparing a 5-month period in 2019 to the same period in 2021, Illinois consumers saved over $200 million in fees for high-cost loans. At the same time, Capital Good Fund, a nonprofit small-dollar lender, reported a daily application volume increase of over 70% within days of the law’s signing. Not yet reported are the loans made by other affordable online lenders since the PLPA.
The Woodstock Institute email warns that while Illinois consumers have gained some key protections thanks to the new law, there are still “rogue” online lenders that attempt to skirt the laws in creative ways:
One item of “borrower beware”: as we have seen in other states with rate caps, rogue online lenders charging astronomical rates are trying to take advantage of the exit of payday and title lenders. These illegal lenders — some based in exotic, faraway places and some calling themselves “tribal lenders” — have been around for decades, but they’re trying to profit from the fact that the legal predatory lenders have gone.
Consumer advocates continue to note that payday loans have long-term, negative impacts on borrowers.
Roughly 80% of those surveyed said that their payday loan left them in a worse position than they were in before they took out the loan. That’s because it generally takes borrowers roughly five months to pay off the loans, and by then they’ve paid an average of $520 in interest and fees on top of the original loan amount.