Study shows consumers continue to access credit after 36% rate cap on short-term loans
The Woodstock Institute released results of statewide polling in Illinois that indicates consumers in the state support the Predatory Loan Prevention Act. The law, which went into effect last year, caps interest rates on short-term loans (like payday loans) at 36%.
Among the key findings of the poll:
- 86% of Illinois residents support the rate cap. Support was overwhelmingly strong among Democrats, Republicans, and Independents alike.
- Illinois consumers, including low-income adults, continue to have access to credit. Nearly two-thirds of low-income adults (62%) and more than two-thirds of adults overall (69%) were able to borrow money since the rate cap took effect.
- Consumers who have needed emergency cash since the rate cap took effect have employed a variety of methods to meet their needs. Using a credit card was the most common method (24% of low-income adults and 27% of all adults). Consumers also employed methods that did not involve taking on more debt. The second most common method was using personal savings (23% of low-income adults and 22% of all adults).
Poll respondents indicated the rate cap has created a safer lending environment in Illinois.
“A few years ago, I habitually used high-interest payday loans,” said Tanekia Smith, one of the poll’s respondents. “I would borrow $500 and pay off the loans early. Had I not, I would have ended up paying $1000 back each time. I support the 36% rate cap because I believe credit should be safe, especially for vulnerable consumers and people who are already struggling.”
One Illinois Congressman said the experience in the state points to the need for a nationwide 36% interest rate cap on short-term loans.
“Being poor in America is simply too expensive, and working families deserve protections from predatory lenders. It’s a shame to see families in vicious cycles of debt because they need to take out a loan to pay their rent or a utility bill,” said Congressman Chuy García, the lead sponsor of legislation to establish a nationwide rate cap of 36% APR.
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