Payday Loans and Predatory Lending in Illinois

Illinois Predatory Loan Prevention Act

Effective March 23, 2021, the Predatory Loan Prevention Act (PLPA) caps APR on nearly all consumer loans at 36%. Covered lenders include:

• Payday lenders
• Installment lenders
• Auto-title lenders
• Small-dollar lenders
• Most retail installment finance

Excluded: federally chartered banks, some specific retail credit, pawnbrokers (regulated separately).

Consequences of a PLPA violation

• Loan is null and void — not enforceable
• Borrower is entitled to restitution of any money paid
• Lender faces civil penalties up to $10,000 per violation
• Illinois Attorney General and Secretary of Financial and Professional Regulation enforce

If you have a high-APR loan

If a current or past loan in Illinois had an APR over 36%:

1. Calculate the effective APR — include all fees, not just the advertised interest rate
2. Identify the lender's type — PLPA applies to most non-bank consumer lenders
3. Check whether the lender is licensed in Illinois at idfpr.illinois.gov
4. Consult Illinois Attorney General Consumer Fraud or a consumer-protection attorney
5. You may have:
   • A defense to repayment
   • A right to restitution of amounts already paid
   • A claim for attorney's fees and damages

Out-of-state lenders and online lenders

Online lenders sometimes claim they are not subject to Illinois law because they are chartered elsewhere. Illinois courts have increasingly rejected these "rent-a-charter" and "true lender" arguments. A lender making loans to Illinois residents is generally subject to Illinois law regardless of their claim about where they are chartered.

Bank overdraft fees and "credit products"

Bank and credit union overdraft fees, deposit-advance products, and some prepaid card "credit" products can function like payday loans. These are subject to separate regulation (by the CFPB for many, and by the OCC for national banks). APR disclosure rules often apply.

Specific abusive practices to watch for

• Loan stacking — being funneled into multiple loans at once
• Refinancing and rolling over loans repeatedly (the debt trap)
• Balloon payments that are unaffordable at the end of short terms
• Auto-title loans secured by vehicle title that can result in repossession of essential transportation
• Check-holding schemes where the lender holds a post-dated check
• Aggressive collection calls that violate FDCPA if a third-party collector is involved
• Threats of criminal prosecution for unpaid loans (unlawful)

Alternatives to payday loans

• Payday alternative loans (PALs) from credit unions — capped at 28% APR by federal rule
• Paycheck advance apps — some charge fees that effectively exceed 36% APR when calculated honestly; review carefully
• Employer salary advance — many employers offer low- or no-cost advances
• Community action agencies — emergency cash assistance for specific needs
• Religious congregations and community groups — small emergency funds
• Negotiate with creditors — many will accept payment plans that avoid the need for a payday loan
• Nonprofit credit counseling — debt management plans with lowered rates

If you are being sued on a payday or high-APR loan

1. Appear at the court date — do not let a default judgment happen
2. Raise the PLPA defense if the loan was made after March 23, 2021, with APR over 36%
3. Consult a consumer-protection attorney — some take cases on contingency under fee-shifting provisions
4. Challenge lender's licensing, calculation of amount due, documentation

Free help

• Illinois Attorney General Consumer Fraud — 1-800-243-0618 (Chicago) or 1-800-243-0607 (Springfield)
• Illinois Department of Financial and Professional Regulation — idfpr.illinois.gov
• Legal Aid Chicago — Consumer — 312-341-1070
• Illinois Asset Building Group — advocacy and resources
• Consumer Financial Protection Bureau complaint — consumerfinance.gov/complaint