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 on 312-427-2114 extension: 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 May 2009, 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 1435) 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. For more on SB 1435, click here.