The Illinois General Assembly in January passed the Predatory Loan Prevention Act, which will implement a 36% interest rate cap on consumer loans, including car title loans and payday loans. 

Specifically, the PLPA would apply to any non-commercial loan made to a consumer in Illinois, including closed-end and open-end credit, retail installment sales contracts, and motor vehicle retail installment sales contracts.

 

Senate Bill 1792, filed as part of the Illinois Legislative Black Caucus’ economic equity omnibus bill, replaces the traditional Truth-in-Lending Act definition of APR with Military APR as defined in the Military Lending Act. The latter distorts the calculation of the amount financed in a retail installment contract, thus complicating motor vehicle transactions.

The bill, which cleared both General Assembly chambers in two days, could impact dealers when products and services such as GAP waivers and service contracts are financed with a vehicle purchase. If the interest rates grow beyond 36%, dealers would be in violation of the PLPA.

 

Dealers are urged to contact Gov. J.B. Pritzker’s Chicago office at (312) 814-2121 and urge for the bill to be vetoed, so that other legislation can be written to protect consumers from predatory lending practices without limiting their access to dealer products and services.

 

Loans that violate the Act would be considered void and uncollectable. "Any loan made in violation of this Act is null and void and no person or entity shall have any right to collect, attempt to collect, receive, or retain any principal, fee, interest, or charges related to the loan," the legislation states.

 

The General Assembly has until Feb. 12 to send the bill to Pritzker, and the governor has until mid-March to sign it. The rate cap would be imposed on all loans made on or after the effective date.

In Illinois, the average annual percentage rate on an auto title loan is 179%. On payday loans, the average APR is 297%. Federal law already protects active-duty military with a 36% APR cap. SB 1792 would extend the same protection to Illinois veterans and all other consumers. Seventeen states plus the District of Columbia have 36% caps or lower.