On 21 March 2011, new legislation came into practice for the regulation of Illinois Payday Loans. Payday loans have been the subject of much debate in Springfield, State Capital before it went to the State Legislature for approval. The regulations and licensing requirements are in operation and offer consumers protection from profiteering and unscrupulous lenders.
The Department of Financial and Professional Regulation is responsible for issuing licenses to lenders. They will monitor and enforce all aspects of Illinois Payday Loans Reform Act. Failure to comply with the conditions of the Act will see the license to provide lending services revoked, with the possibility of fines and criminal prosecution for lenders.
Illinois payday loans have seen an increase in the number of lenders by 23% in the last year and reflect the growing demand for short term loans. Many individuals that start off with one loan find themselves unable to repay the loan on time. They may take another loan to cover the first and soon find themselves in an unbreakable spiral of debt. The unregulated amount of interest charged by lenders has been reported as high as 400% in many cases.
The new Illinois payday Loans Reform Act addresses a number of issues raised by investigation and studies into payday lending. The regulations apply to three specific small loans with the intention of reducing interest charges, allowing a borrower the longer repayment terms and ensuring there are some control over when and if roll over loans can be given.
The introduction of a new small consumer loan provides several advantages for the borrower. Firstly, the interest rates that can be charged are capped at 99% in contrast to the 200-400% currently charged on payday loans. Repayments are also capped to keep them under 22.5% of the gross monthly income. Repayment terms can be spread over a longer time period, usually up to a year. In the case of the new consumer loans, companies which provide Illinois payday loans will not be licensed to provide the new type of small loan.
Illinois payday loans will remain the same. Interest charges can be as high as 400% and the repayment period is typically restricted to 2-4 weeks. The regulations do offer limited protection to the borrower. A roll-over loan cannot be given, if the individual will have been in debt for a 45 day continuous period. Illinois payday loans law has provisioned for a borrower to enter an interest free re-payment plan, if they have been in debt for more than 35 days. This arrangement must be requested by the borrower and applies only to payday loans.
Illinois Payday loans installment usually has a repayment period of up to six months. A roll-over loan cannot be given if it extends the debt for longer than six months. The repayment can be no more than 22.5% of the gross monthly income.
The new legislation on Illinois payday loans does go a long way to prevent individuals getting into a position with their debts that may take years to resolve. However, there are still those who feel that the legislation is not strong enough to prevent unscrupulous lenders taking advantage of those who are most financially vulnerable and resort to using Illinois payday loans to survive.
