Payday/High-cost Loans

Historic Legislation Passes in Illinois to Protect Consumers from Predatory Loans

CFA Applauds the Illinois General Assembly for Passing a 36% Rate Cap on Consumer Loans with Bipartisan Support

Washington D.C. – Consumer Federation of America (CFA) applauds the Illinois General Assembly for passing the Predatory Loan Prevention Act, a bill that will implement a 36 percent interest rate cap on consumer loans, including payday and car title loans. This bill is supported by more than 50 consumer, faith, labor, community, and civil rights organizations, including CFA, along with financial institutions and Illinois officials.

This historic legislation comes in the wake of numerous moves by federal financial regulators to ease regulations for predatory, high cost lenders. Last year, the Consumer Financial Protection Bureau (CFPB) rolled back critical, yet modest protections for payday loans, and the Office of the Comptroller of the Currency (OCC) issued a regulation which eviscerates the power of state interest rate caps.

Illinois would be the second state in three months and the 18th state (plus Washington D.C.) to impose these much-needed restrictions on payday loans. In 2020, Nebraska voters approved a ballot measure to cap interest rates with more than 80% of voters in support. Nationwide, 70% of voters across party lines support rate caps, especially in light of the COVID-19 pandemic.[i]

“We applaud the Illinois General Assembly for this much-needed legislation which will protect consumers from triple-digit interest rates that cause devastating cycles of debt,” stated Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. “Consumers are facing unprecedented financial challenges, and we know that these lenders prey on communities of color and financially vulnerable consumers. Illinois is on track to become the most recent state to put a stop to these predatory practices.”

Payday loans are sold as a lifeline to consumers in desperate need of cash, but carry an average interest rate of nearly 400%. These loans are heavily marketed to financially vulnerable consumers who often do not have the means to pay back lenders and are forced to reborrow, skip other financial obligations, or default on the loan. The CFPB itself found that more than 80% of payday loans are re-borrowed within a month, effectively trapping consumers in a cycle of debt.

“In the face of overwhelming public support for rate caps and the lack of regulatory oversight, Congress must act to protect consumers from high-cost lending schemes,” stated Gittleman. “Congress must pass the Veterans and Consumers Fair Credit Act, to cap interest rates at 36% for all consumers,” she concluded.

[i] Americans For Financial Reform, Center for Responsible Lending, and Lake Research Partners, Polling Memo, May 2020. Retrieved from

Contact: Rachel Gittleman, 609-571-5953