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Thursday, July 22, 2010

New Payday Advance Loan Legislation In Illinois

Illinois payday advance loans
In late June Illinois governor Pat Quinn signed the House Bill 537 which is aimed to limit the payday advance loan Illinois and payday lending industry in general. According to the new Bill the interest rates will be significantly capped – at 99% for the loans under $ 4.000 and 36% for the loans higher than $ 4.000.

Statistics shows that the gross income of the most of Illinois inhabitants is approximately $30,460 per year and only some people earn more than $70.000 per year.

The grounds for the House Bill

Pat Quinn stated that for many people payday advance loan in Illinois is the only possibility to pay the urgent bills and to keep their families. This is why it is so simple for the lending companies to “milk” money out of their consumers by means of increasing the interest rate and shortening the repayment periods. And this is the main reason for the government to take paints to protect Illinois inhabitants from the payday advance lenders. To achieve this it has been decided to try to make the payday advances in Illinois more affordable.

Some highlights of the House Bill

1. The loans are granted based purely on the consumer's ability to repay the debt.
2. Monthly payments of the consumers must not exceed 22.5 percent from his \ her monthly gross income.
3. The repayment term is prolonged for two months comparing with the previous one and now makes six month.
4. The lenders don't have right to penalize the customers for early pay-offs.

At the same time some governors think that the state should not only limit the lending industry but also take measures to teach the consumers save their money thus avoiding the payday advance loans Illinois. The most optimal decision for the state would be to create efficient legislation together with learning environment which would promote sound responsible lending. Proper legislation will provide that responsible and honest lending companies will continue their activities as the state needs them because they provide jobs, pay taxes and contribute the USA economy.

Currently the main problem of the country as well as the main cause for world economic recession is the large number of irresponsible payday advance loan Illinois consumers who take the unnecessary advance payday loans which they cannot repay. This is why the finger of the legislation should not point only to the lenders but to the consumers as well. At the same time the lending companies provide enough information for consumers to estimate and consider the risks and take the correct decision.

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