Legislature fails to support effort to cap loan rates that now exceed 240%
A coalition of consumer advocacy groups expressed dismay today as legislative efforts to cap pawn broker loan rates at 36% were stymied by the efforts of industry lobbyists.
“Loans that charge 240% APR are a perfect example of an issue that is controversial only in the Capitol,” said State Sen. Jacqueline Collins (D-Chicago). “Ordinary people resoundingly support rate caps and oppose exceptions for pawnbrokers. Last night was a win for highly paid industry lobbyists and industry cronies - at the expense of consumers.”
Advocates representing Chicago-based Woodstock Institute explained why the measure to cap pawn broker loan rates was not successful:
“It’s easy to mobilize people who are making money, even if it’s at the expense of people who are losing money,” said Brent E. Adams, Vice President for Policy and Communication at Woodstock Institute and former head of the state agency that regulates consumer lenders in Illinois. “Not closing the loophole means consumers previously targeted by the payday lenders will now be targeted by the pawnbrokers. It is also an invitation for consumer lenders who are currently complying with the 36% cap to come to the legislature asking for their own loophole.”
Other advocates pointed to the consumer cost paid by not addressing the current legal loophole that allows pawnbrokers to charge such high interest rates:
“Every day we wait to close this loophole costs customers more than $100,000 a day in pawnbrokers fees,” said William McNary, Co-Director, Citizen Action/Illinois. "Capping the interest rate at 36% means more money in consumers pockets for spending, saving, and investing. That’s not only good for consumers, but also the community and the local economy.”
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