Payday Lenders Lose Initial Bid to Block Illinois Law

Payday Lenders won’t submit to regulation without a fight. Last Friday, Payday Lender Illinois Lending Corp sued in Cook County Court for a temporary restraining order (TRO) against Illinois’ new and modified payday loan laws, the Consumer Installment Loan Act and the Payday Loan Reform Act (CILA / PLRA).

The Egan Coalition—an Illinois group of advocates for payday lending reform, which includes Chicago Appleseed—played a central role in advocating for these pro-consumer bills, which were passed last year.

Among other things, CILA / PLRA caps interest on all consumer loans—99% for loans under $4,000 and 36% for loans above that amount. The law also prohibits companies from offering both payday loans and consumer installment loans. Illinois Lending Corp., which offers both types of loans, argued that this latter provision would irreparably harm its business.

But according to Egan Coalition member group Citizen Action/Illinois co-director Lynda Delaforgue, the provision protects consumers from being “bounced back and forth between the (consumer installment and payday) products so that they never get out of that cycle of debt.”

Apparently, Circuit Court Judge Carolyn Quinn agreed. Judge Quinn ruled against the Plaintiff, and did not issue a temporary restraining order.

Dory Rand, President of Woodstock Institute, also an Egan Coalition member group, paraphrased the court’s ruling:

The plaintiff did not show irreparable injury would result from surrender of a PLRA or CILA license and there was no showing of a likelihood of success on the merits of ILC’s legal claims. The legislature enacted the law to protect consumers from unscrupulous lenders, although not all lenders covered by the statute are presumed to be unscrupulous. For the safety and welfare of the public, the market may not operate unimpeded. Granting a TRO here would undermine the standards where plaintiff is on record as supporting the bill and waited until last minute to file.”

The fight is not over. While Illinois Lending Corp was filing suit, Illinois Rep Daniel Burke introduced a bill before the Illinois House Executive Committee; the bill would remove the dual license restriction at issue in the suit. The case is set for status on April 13th, with a hearing on April 29th. Check back with our blog for updates later next month.

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About Katy Welter

Katy Welter is a law and policy analyst for Chicago Appleseed Fund for Justice. She is a graduate of the University of Chicago Law School, the University of Chicago Harris School of Public Policy, and DePauw University.

One response to “Payday Lenders Lose Initial Bid to Block Illinois Law”

  1. Robin says :

    I believe the figures in your article for maximum interest rates are incorrect.

    A friend recently got a loan with 400 % APR, and when I looked up the act,
    “consumer loans” had a max of 99%, but there is another category of installment loan
    with a 400 % max.

    The loan company offered my friend a bigger loan than he requested, which put him out of the “consumer loan” category and into this other category.

    Seems they have found a way around the law.

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