Governor Lauds Proposed Pay Day Lending Rules
FOR IMMEDIATE RELEASE
September 13, 2000
CHICAGO -- Governor George H. Ryan, at a Public Hearing for the Proposed Pay Day Lending Regulations, today called for increased rules for short term lending in the following testimony:
The proposed regulations you are discussing today, I believe, will provide important protections for consumers.
Last Spring, as you know, I signed into law, Senate Bill 355 - a measure that passed with bipartisan support in the General Assembly and with my administration's strong support.
It authorized the department of financial institutions to create rules to protect pay day loan customers.
Many people find themselves in dire financial straights at some time in their life.
Working people can find themselves with an unexpected cost -- a hospital bill or perhaps the car which they need to go to work has broken down and needs immediate repair.
Maybe they don't have the best credit or no credit and they have no place to turn,
I understand what that is like.
Pay Day Loans and Automobile Title Loans can provide just that kind of emergency financing.
But if customers are not careful, they can and do often find themselves in a very deep hole that they didn't know they were digging.
I have heard heart-wrenching stories of consumers who have borrowed modest amounts of money and made an honest effort to repay their debts, only to find themselves caught in a downward spiral of mounting interest and debt that they can't get out from under.
The Department of Financial Institutions has taken a look at this issue.
It found the average customer is a 35-year-old woman, earning about $25,000 a year.
Maybe she is a single mother making ends meet or supporting a parent.
Unfortunately, she has rolled over that loan an average of 13 times at more than 500 percent annual percentage rate.
Without noticing, that woman has put a very big mortgage on her paycheck and her future.
I believe there are times when consumers are not fully aware about what they are getting into.
Now a majority of financial institutions in Illinois engage in fair and honest lending techniques.
But, I believe there are some unscrupulous lending practices in the marketplace today and that some consumers are falling victim to them.
We have to establish some protections for consumers, some fair practices that all of us can live by.
The proposed rules would limit pay day loans to $300 and car title loans to $2,000.
The rules would establish a 30-day cooling off period between loans.
In addition, loans would be limited to two rollovers and consumers would need to pay down 25 percent of their debt as a condition of each refinancing.
I think these proposed rules make good sense.
They would protect consumers, while still preserving a legitimate financial product.
In everything I do, I am concerned about fairness.
I believe these rules would create a better, fairer system for Illinois consumers.
I would like to commend you for the fine work you have done.