InfoBytes Blog
Illinois adopts rules implementing Predatory Loan Prevention Act
On April 22, the Illinois Department of Financial and Professional Regulation (IDFPR) published in the Illinois Register a notice of adopted rules to implement the Predatory Loan Prevention Act (PLPA or the Act). As previously covered by InfoBytes, the Act was signed into law in March 2021 to prohibit lenders from charging more than 36 percent APR on all non-commercial consumer loans under $40,000, including closed-end and open-end credit, retail installment sales contracts, and motor vehicle retail installment sales contracts. Violations of the Act constitute a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act and carry a potential fine up to $10,000. Additionally, any loan with an APR exceeding 36 percent will be considered null and void.
In general, the adopted rules require lenders to provide a disclosure to consumers about the 36 percent APR rate cap established by the PLPA, incorporate the APR calculation method required by the PLPA, and amend the rules for reporting of payday loans to the state database. The rules specify that words in the definitions are not defined to have the same meaning as in Regulation Z, including any interpretation by the CFPB. For purposes of calculating the PLPA ARP, the rules specify that the calculation excludes only certain specified bona fide fees, but includes finance charges, loan application fees, and fees imposed for participation in any plan or arrangement for a loan, “even if that charge would be excluded from the finance charge under Regulation Z.”
The IDFPR made several amendments related to rate cap disclosure notices. These specify that all loan applications must include a separate rate cap disclosure signed by the consumer (disclosures must be provided in English and in the language in which the loan was negotiated) that clearly and conspicuously states: “A lender shall not contract for or receive charges exceeding a 36% annual percentage rate on the unpaid balance of the amount financed for a loan, as calculated under the Illinois Predatory Loan Prevention Act (PLPA APR). Any loan with a PLPA APR over 36% is null and void, such that 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 annual percentage rate disclosed in any loan contract may be lower than the PLPA APR.”
The rules take effect August 1.