Illinois Amends Consumer Installment Loan Act; Caps Interest Rates, Eliminates Fees
On June 21, Illinois Governor Pat Quinn signed HB0537, which amends the Illinois Consumer Installment Loan Act by placing a cap on interest rates, introducing income-based repayment measures, eliminating balloon payments and pre-payment penalties, and expanding the monitoring of licensed lenders. Under the new provisions, the interest rate on loans over $4,000 will be capped at 36% and the interest rate on certain loans under $1,500 will be capped at 99%. Moreover, the interest rate that may be charged on the unpaid balance of a delinquent account on small consumer loans will be capped at 18% per year. Lenders are prohibited from making small consumer loans that would result in a monthly payment exceeding 22.5% of the borrower’s gross monthly income. Lenders also may not condition the extension of credit on the consumer’s agreement to repay the loan using preauthorized electronic fund transfers. Finally, the bill requires certain information pertaining to small consumer loans to be entered into a state-wide electronic database. The amendments become effective March 21, 2011.