DON’T BORROW THE MONEY!

The Illinois payday loan reform law (capping interest rates lenders can charge on installment loans) took effect on Monday, March 21, 2010. I was against the reform from the start and wrote a number of blogs about the subject, but no legislators have paid attention. The do-gooders think the legislation is a protection for consumers, but it’s not! It will drive payday loan companies out of business, so those who are desperate for money won’t be able to borrow it legally. What will their only option be?

The payday loan companies have to charge high interest rates to be able to cover the default rate of those who don’t pay the loan back. As I wrote before, “Because there are so many deadbeats in the world, companies base the amount of the interest they will charge on the ability of the borrower to pay the money back. The worse one’s credit score, the higher the interest rate charged. If a company is worried about one’s paying back a loan, they have to charge a high interest rate. This is third grade mathematics.”

The lawsuit filed last week In Cook County Circuit Court by Illinois Lending Company, which has six Chicago area locations, said, according to Crain’s, “That its business will be irreparably harmed by the law’s provision barring companies that offer payday loans — short-term unsecured loans aimed at enabling strapped consumers to pay bills due before their next paycheck — from making installment loans, slightly longer-term borrowings. ‘There is no evidence that consumers have been injured where both (installment and payday) loan products are offered in the same place of business,’ the lawsuit states.”

Crain’s also reported that, “The company is asking for an injunction to halt the provisions barring payday lenders from offering installment loans.”

Lynda Delaforgue, co-director of Citizen Action/Illinois, a consumer advocacy group in Chicago, said consumer advocates are willing to negotiate changes with the industry so long as consumer protections are included to keep borrowers out of spiraling debt.


Borrowers can keep themselves from spiraling in debt by not obtaining a payday or installment loan! It is the borrower's own choice. Nobody is holding a gun to people’s heads telling them they have to get a payday loan; they do it by free choice.

The only guns involved will be the ones law-abiding citizens will see in their face, when someone, desperate for cash could not get a payday loan because the store went out of business. Because, after all, money doesn’t grow on trees!