A state study found that a 2005 law regulating saved Illinois borrowers $20.6 million in loan fees and interest charges over 18 months.
The good news is tempered by the fact that payday lenders have been moving into longer-term, high-interest loans not covered by the reform law, according to consumer advocates.
"Our worst fears have been realized," said William McNary, co-director of Citizen Action/Illinois. He said lenders have told his organization that less than 5 percent to 10 percent of the loans they now issue are payday loans, because they don't make money the way they used to.
are short-term loans for small amounts of money secured against a post-dated check. The industry says the loans provide people with quick cash for emergencies, but consumer advocates say the loans prey on the poor with triple-digit interest.
The law limits the interest that can be charged for payday loans to $15.50 per $100 and caps loans based on a borrower's pay, along with other reforms.
Before the law took effect, the average finance charge for short-term loans was $20 per $100 borrowed for a 14-day loan and $45 per $100 for a 31-day loan, according to the Illinois Department of Financial and Professional Regulation report. The average finance charge offered since the reform law was $15.36 per $100 loaned.
Because of the reforms, "consumers are better protected from falling into an endless cycle of debt," Gov. Blagojevich said in a statement.
"It's clear that the law is working as intended," said Bob Wolfberg, president of the Illinois Small Loan Association. He said the industry now makes less money off payday loans, which has forced lenders to offer different products, including longer-term loans.
Sources : http://www.suntimes.com/
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