Illinois Consumer Group Applauds Effort to Cap Pawn Loan Interest Rates at 36%

Woodstock Institute backs bill that would close the pawn shop loan loophole

Consumer advocates at the Woodstock Institute in Chicago are backing a legislative effort to close what they say is a loophole in current small dollar lending laws in Illinois. While the state's Predatory Lending Prevention Act (PLPA) caps most short-term, small dollar loans at an interest rate of 36%, certain loans offered by pawn brokers are exempt from this cap.

Legislation sponsored by Senator Jacqueline Collins of Chicago would extend the protections of the PLPA to pawn loans, capping them at 36% as well. Currently, rates for these loans can exceed 240%.

“Pawnbrokers are not shy about exploiting a loophole that allows them to make predatory loans to our veterans as well as all other Illinoisans,” State Senator Jacqueline Y. Collins (D-Chicago) said. “I’m asking my colleagues in the legislature to close this loophole by voting for my bill.” The legislation is Senate Bill 4241. 

“Enough is enough. Illinoisans are fed up with loans that charge triple digit interest rates and prey on vulnerable families,” State Representative Sonya Harper said. “Fortunately, all we need to do is pass legislation that will fix this problem.”

Harper is the House sponsor of the bill.

A recently released Woodstock Institute investigation showed that Illinois pawnbrokers are charging as much as 240% on short term loans.

“Our investigation shows that this problem is not an isolated incident,” said Horacio Mendez, president and CEO of Woodstock Institute. “The best way to solve it is by requiring Illinois pawnshops to comply with the state 36% interest rate cap. That way, pawnbrokers are relieved from having to determine customers’ military status and all customers, including veterans, are protected from predatory interest rates.”

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