Financial Reform & Predatory Lending Reform

Citizen Action/Illinois continues our work to reform regulations on payday loans in Illinois, which lock Americans into an insurmountable cycle of debt. For more information on the Monsignor John Egan Campaign for Payday Loan Reform, or if you have had trouble with payday, auto title or installment loans, contact Lynda DeLaforgue at Citizen Action/Illinois, 312-427-2114 ext. 202.

Two Major Victories for Consumers!

Short Term Lending

On January 13, 2009, the Joint Committee on Administrative Rules (JCAR) adopted proposed amendments to the rules implementing the Consumer Installment Loan Act issued by the Illinois Department of Financial and Professional Regulation. These rules represent an important victory for consumers in Illinois.

The rules eliminate the 60-day limit from the definition of a short-term, title-secured loan. Given the average title loan in Illinois has a term of 209 days – long enough to ensure that it would not be subject to the rules as currently written – IDFPR rightly deleted the loan term as a trigger for applicability. The deletion of the term from the definition of a title-secured loan gives IDFPR broader authority to regulate industry players and protect consumers. Similarly, to address increasing automobile title loan principals, IDFPR increased the maximum principal amount within the definition to $4,000. The new rules will also require the industry to utilize a consumer reporting service and provide consumers with equal, periodic repayment plans. To learn more about the new rules, click here.

Mortgage Foreclosures

On January 14, 2009, the Illinois General Assembly passed Senate Bill 2513, House Amendment #3, which establishes a moratorium of up to 90 days on mortgage foreclosures for homeowners that enter housing counseling. The legislation also requires all lenders and loan servicers notify homeowners who are 30 days delinquent on mortgage payments that they have 30 days to seek mortgage counseling services to get their loan back on track; if a borrower enters counseling, they would get an additional 30 day moratorium on foreclosure in order to work out a payment plan or refinance option. To learn more on SB 2513, click here.

The Monsignor John Egan Campaign for Payday Loan Reform

The Campaign for Payday Loan Reform began in 1999, shortly after a poor woman came to confession at Holy Name Cathedral and spoke tearfully of her experience with payday loans. Monsignor John Egan assisted the woman in paying off both the loans and the interest, but his outrage towards the unscrupulous lenders had only begun. He immediately began calling friends, organizations, and associates to try to challenge this contemporary usury. Shortly after his death, in 2001, the coalition he helped to create was renamed the Monsignor John Egan Campaign for Payday Loan Reform.

In 2005, after several years of hard work, the Egan Campaign celebrated when the Illinois General Assembly voted overwhelmingly to pass comprehensive legislation to regulate payday lending and protect consumers from the worst abuses of the industry. This was a major victory for the efforts of the Campaign and for the working families of Illinois.

Unfortunately, after the law’s passage, the payday loan industry has moved to evade the important protections included in the Payday Loan Reform Act leaving unsuspecting customers vulnerable to the very abuses the General Assembly worked to prevent.

• Payday lenders are now offering expensive and dangerous longer term payday loans to get around Illinois law. Since the Payday Loan Reform Act regulates loans of 120 days or less, a majority of the Illinois payday loan industry has moved to new products with terms of 121 days or more. These “look alike” loans have a significantly higher price tag than payday loans regulated by the PLRA. They are often called “installment loans” or “check book loans”.
• The treadmill of indebtedness returns as a disturbing trademark of the longer term payday loans. These long term predatory loans are actually traditional payday loans with multiple built in renewals. For example, one major Illinois lender offers a 140 day loan requiring nine biweekly interest payments with a final balloon payment of the entire principal amount. This loan is essentially a 14-day payday loan with 10 built in rollovers

In 2010, after three years of negotiations with industry representatives, the Msgr. John Egan Campaign for Payday Loan Reform introduced “The Consumer Installment Loan Reform Act” (SB 655 Amendment One) with Governor Quinn and Attorney General Lisa Madigan. The Consumer Installment Loan Reform Act codifies a new loan product in Illinois – “small consumer loans.” The Act defines within CILA (Consumer Installment Loan Act) a “small consumer loan” at interest rates at or below 99% APR – drastically cutting excessive and predatory interest rates on loans of $4,000 or less. The Act balances the need to offer borrowers access to credit, while at the same time protecting consumers from potentially abusive rates, fees, and predatory debt cycles, and gives an opportunity for the Payday Loan Reform Act to actually work.

Americans for Financial Reform

In August of 2009, Citizen Action/Illinois joined over 200 state and national partners in the Americans for Financial Reform coalition to campaign for meaningful consumer protections to prevent another economic collapse created by unregulated financial activity.

Citizen Action/Illinois and Woodstock Institute built the state Americans for Financial Reform coalition with the assistance of longstanding partners including the Illinois Attorney General, the Illinois Department of Professional & Financial Regulations and the Monsignor Egan Campaign for Payday Loan Reform.

Illinois at the Epicenter of the Financial Reform Movement

In October 2009, the United States House of Representatives Financial Services Committee, including Congresswoman Melissa Bean and Congressman Bill Foster, began consideration of the Consumer Financial Protection Agency Act.  The CFPA would regulate consumer credit products like mortgages, credit cards and payday loans as a stand-alone agency, consolidating consumer protection duties at the federal level.
 
Citizen Action/Illinois brought housing and credit counselors together with local leaders in September 2009 at two consumer financial protection reform round tables.  An early supporter of the Consumer Financial Protection Agency, Illinois Attorney General Lisa Madigan moderated the Aurora round table in Rep. Foster’s district.  Secretary of the Illinois Department of Financial & Professional Regulation Brent Adams moderated the Palatine round table in Rep. Bean’s district with special guest Cook County Sheriff Tom Dart, a national leader in foreclosure fairness efforts.

Congresswoman Melissa Bean and the Fight Against Preemption

Congresswoman Melissa Bean introduced an amendment to the CFPA preempting states’ rights to regulate financial products within their own borders, exempting large national banks from state consumer protection laws.  Representative Bean sought to maintain the economic status quo, weakening the CFPA from a strong regulatory floor into a ceiling thereby restricting states from building greater consumer protections.

Illinois activists and grasstops leaders united in protest and Congresswoman Bean retreated from her defense of big banks and withdrew her preemption amendment.

The Showdown in Chicago

The American Bankers’ Association scheduled its annual meeting in Chicago on October 25 – 27, 2009.  People from all over the country came to Chicago to protest the ABA’s lobbying against financial reform.  The three days of activism culminated with 5,000 marchers descending on downtown Chicago, marching across the Michigan Avenue Bridge and rallying at the bankers’ hotel.

The U.S. House of Representatives Votes for Historic Financial Reform

Our ongoing activism pressured Congresswoman Bean to retreat from her support of big banks again, and the House voted to pass the comprehensive Wall Street Reform and Consumer Protection Act, including the CFPA.  The largest reform package since the New Deal, it established the CFPA, a national systemic risk regulator, derivatives regulation and executive compensation, financial markets and federal regulator oversight.

The Senate plans to take up the bill in January 2010.  Americans for Financial Reform will continue our fight for increased Wall Street oversight and consumer protections.