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Sangamon County judge issued a preliminary injunction against
the cap after pawnbrokers filed a lawsuit against the Illinois
Department of Financial and Professional Regulation.
Legislation is pending in Springfield that would close the
loophole and require Illinois pawnbrokers to charge no more than
36% APR for their loans.
A Woodstock Institute investigation showed that Illinois
pawnbrokers were overcharging active-duty service members on
loans with interest as much as 240%. Federal law is also
supposed to cap those interest rates for service members.
“The best way to solve it is by requiring Illinois pawnshops to
comply with the state 36% interest rate cap,” said Horacio
Mendez, president and CEO of Woodstock Institute. “That way,
pawnbrokers are relieved from having to determine customers’
military status and all customers, including veterans, are
protected from predatory interest rates.”
State Sen. Craig Wilcox, R-McHenry, an Air Force veteran, said
educating the consumer is key.
"I'm not here to disparage the industry, we've had this industry
for centuries," Wilcox said. "Cash flow is important, but the
reality is, we can't just legislate this."
Kelly Swisher, president of the Illinois Pawnbrokers
Association, said the loans they deal with are usually short
term.
“Typically 30 to 60 days, so we are captured under [the Truth in
Lending Act], so we have to put down the 240%, but in actuality,
it is a very short period of time,” Swisher said.
Woodstock Institute notes that nationally, annual interest rates
on pawn loans are as low as 12%, much lower than the proposed
36%.
“Enough is enough. Illinoisans are fed up with loans that charge
triple digit interest rates and prey on vulnerable families,”
state Rep. Sonya Harper, D-Chicago, in a statement.
“Fortunately, all we need to do is pass legislation that will
fix this problem.”
Kevin Bessler reports on statewide issues in
Illinois for the Center Square. He has over 30 years of
experience in radio news reporting throughout the Midwest.
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