Ignoring the voices of families and communities who have worked for years for relief from the harms of predatory payday lending, a handful of members of Congress have introduced a bill that would repeal the payday loan rule recently finalized by the Consumer Financial Protection Bureau.
The new payday loan rule requires lenders to make loans only after they have determined whether the borrower can afford to pay it back. This is a commonsense measure that is designed to protect people from being trapped in predatory high-cost loans.
Despite broad public support for the payday loan rule, some Members of Congress are siding with payday lenders and trying to strip away these new, important protections. Their bill introduced this month would repeal the rule and keep Illinoisans stuck in unaffordable payday loans.
Payday and auto title lending costs Illinois families half a billion dollars per year in fees. Payday loans in Illinois average 404% annual interest. These loans target lower-income families who are least able to afford these high-cost loans.
The payday business model relies and profits on repeat borrowing of unaffordable loans. Seventy-five percent of all payday loan fees are generated from borrowers stuck in more than 10 loans a year. Payday and car title lending leaves people without funds to pay bills, increases their likelihood of bankruptcy, and strips them of their financial security.
We will fight to protect the payday loan rule, which helps ensure that families do not get stuck in this debt trap.
Read more about the payday loan rule and its anticipated impact in Illinois. For more information about high-cost loans in Illinois, check out our report on title lending in Illinois and sign up for our emails to get updates and action alerts on our effort to protect the payday loan rule.