Illinois Governor Pat Quinn Signs Bill Regulating Payday Cash Advance Loans

By: Brent M. Barnhart
Illinois Passes New Legislation Attempting to Regulate Payday Cash Advance Loans

Loan reform continues to sweep the nation, this time with Illinois taking center stage. Governor Pat Quinn has recently signed loan legislation which will become effective on New Year’s Day, 2011. Quinn’s legislation looks to reign in on the Illinois Payday Loan system, plugging up loopholes and taking charge of a relatively unregulated market. Although the new regulations are still a few months away, potential borrowers should familiarize themselves with the new bill and decide accordingly whether or not they want to seek a payday cash advance sooner rather than later.

As mentioned earlier, Quinn’s bill looks to regulate an Illinois cash advance system which, up until the point of his legislation, has been highly unregulated. The bill looks to provide protection to borrowers, attempting to break cycles of debt caused by obscene APRs For example, it’s not uncommon to see cash advance loans in the state with an APR between 700% and 1000%.

New legislation will see APRs capped at 99% for loans under $4,000, meanwhile the APR sits at 36% for loans above $4,000. Monthly loan payments will be limited to 22.5% of the borrower’s income per month, helping to create a realistic payoff period that doesn’t see the borrower drowning in debt. Balloon payments, interest-only payments that occupy the first eleven months of the payment and accumulate into the entire principal payment in the final month, have been outlawed as well.

Generally speaking, the new legislation gives borrowers a chance to be able to borrow and pay off their payday cash advance loans realistically. This will be achieved through loan payments that will pay into interest and principal simultaneously rather than sticking borrowers with endless periods of paying into interest. Additionally, by having payment requirements that stay static, borrowers can’t be deceived by lenders attempting to push a lower initial rate. In short, the climate of Illinois payday cash advance loans is changing and it’s to the benefit of the borrower.