Consumer Protections

About this Policy

We continue to see wealth stripped from communities across Illinois by dangerous and abusive financial products and practices. These financial products and services – including payday and auto title lenders, currency exchanges, unregulated paid-tax preparers, debt collectors, and more – contribute to the financial insecurity of Illinois families and communities. While often marketed as a way to weather a financial storm or to make it to the next paycheck, predatory loans trap people in a cycle of debt that can take years to recover from.

Predatory products disproportionately strip wealth from communities of color, which contributes to the growing racial wealth divide. To build racial equity, we must advocate for strong consumer protections, and begin to create policies that build financial security. It’s time our policymakers put an end to abusive lending practices and predatory financial services that trap families in a cycle of debt and leave communities economically insecure.

 

Policy Highlights

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    Wealth Stripping in Illinois

    Predatory financial products and services are stripping wealth from Illinois communities and families.

    Payday Lending: Payday loans in Illinois continue to have interest rates above 300%.  According to IDFPR, between February 2006 through December 2013  900,083 consumers took out 5,229,044 loans, or an average of 5.8 loans per consumer. The average annual income of these borrowers was less than $30,000 per year. Hear one person’s experience with payday loans.

    Auto Title Lending:  The number of auto title loans issued in Illinois and the amount of fees paid by consumers has steadily increased between 2009 and 2013. In 2009, Illinois consumers borrowed an estimated 73,116 title loans. By 2013, that number had increased to 100,698 title loans. Between 2009 and 2013, the average title loan fees increased by 47.9%. In 2013, borrowers paid an average of $25.5 million per month in fees to title lenders. Learn more.

    Fines, Fees & Debt Collection: Fines and fees from traffic violations, the court system, and utilities can rack up quickly, pushing Illinois families into debt. For instance, the Illinois Statutory Court Fee Task Force found that just participating in a court case can cost thousands of dollars. When families can’t keep up with these expenses, they are often faced with a grueling debt collections process or other significant consequences, like losing their driver’s license.

    Unfair Auto Insurance Rates: Many Illinoisans rely on cars for daily transportation, yet auto insurance premiums are often unaffordable and unfairly priced. Auto insurance rates are often based on where you live, your credit score, and similar personal factors, rather than being based on how safely you drive. According to Consumer Reports, a good driver in Illinois with poor credit pays $1,535 more than a good driver with excellent credit.

     

    Policy Priorities

    Defend the Consumer Financial Protection Bureau (CFPB). The CFPB is a strong watchdog of the marketplace, reigning in the worst abuses of predatory financial products and practices. It faces threats that would significantly weaken its ability to protect consumers. We will be advocating to defend the CFPB, along with its rulemaking and enforcement efforts.

    Strengthen protections for payday and title loan borrowers. Illinois should follow the lead of the CFPB and many states and strengthen its protections on predatory small dollar loans. Policymakers should remove the carve-out for title lenders in the Consumer Installment Loan Act (CILA). Illinois should also strengthen its protections for all payday, installment, and title loans by establishing strong ability-to-repay requirements, limiting long loan terms and reborrowing, protecting borrowers’ bank accounts from repeated failed debit attempts, and instituting a 36% rate cap on all small dollar loans.

    Protect savings from debt collection. Savings in ABLE accounts and 529 college savings accounts should be protected from debt collection attempts.

    Ensure that auto insurance premiums are fair and affordable. Illinois should prohibit the use of credit scores and information in the determination of auto insurance rates.

    Fight for fair fines and fees. Illinois should ensure that utility rates and court fines & fees are fair and affordable for all Illinois families, providing a waiver for low-income families and ensuring that utilities and the court system are accessible to all.

    Reform the use of driver’s license suspension. Driver’s license suspension should not be used as a debt collection tool. Illinois should prohibit the suspension of driver’s licenses for non-moving violations.

    Advocate for strong federal regulations. The CFPB has the power to protect consumers from abusive and illegal financial practices. They should implement the strongest possible rules to curb the worst abuses of payday lending, auto title lending, debt collection, and predatory student loans.

    Defend Existing State Laws. While our existing state laws do not go far enough to protect consumers, the predatory lending industry is constantly working to strip consumers of existing protections. We must defend against efforts to weaken existing small dollar loan laws, debt collection laws, and other current protections in Illinois law.

    Policy Victories

    Strengthened the wage assignment process in Illinois so that borrowers in default understand their rights.

    Protected workers from losing their wages to abusive fees associated with payroll cards, creating the strongest payroll card regulations in the country.

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