Groups Join Forces to Stop 243% Interest Rate Loans

Fintech lenders, consumer advocates seek to close pawnbroker loophole

Consumer advocates have been joined by representatives of the fintech lending industry in seeking a legislative solution that would prevent pawnbrokers from charging up to 243% interest rates on loans.

The American Fintech Council is teaming up with the Woodstock Institute to push for a fix to the Predatory Lending Prevention Act that would bring pawnbroker loans under the law's rate cap of 36%. Under what the groups say is a loophole in the current law, pawnbrokers may charge up to 243% on loans.

“As an association of responsible innovators, AFC is working to create regulatory standards that balance innovation with consumer protection, and we publicly supported the PLPA and its 36 percent rate cap in January 2021,” said Phil Goldfeder, CEO of the American Fintech Council. “The law is intended to protect consumers from high interest and predatory lending while creating a level playing field for lenders. All lenders should be held to the same standard to ensure Illinois families have access to safe and affordable credit options.”

The Woodstock Institute noted that the high rates charged by pawn brokers impact borrowers least able to access credit.

“Pawn loans in Illinois were capped at 36% APR for more than 80 years. For the past 30-plus years, they have been allowed to charge as much as 243.3% APR,” said Brent Adams, Senior Vice President of Policy and Advocacy at Woodstock Institute. “These exorbitant rates are mostly paid by folks who can least afford to pay them, including lower-income people, migrants, and the unbanked.”

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