Capitol Briefs: Senate advances elections bill, measure targeting ‘predatory’ lending

[May 03, 2024]  By PETER HANCOCK
& HANNAH MEISEL
Capitol News Illinois
[e-mail]

SPRINGFIELD – A bill that would put more controls on certain kinds of high-cost loans to small businesses cleared the Illinois Senate Thursday.

Senate Bill 2234, known as the Small Business Financial Transparency Act, targets a relatively new kind of nontraditional lender in the credit market, online app-based financial service companies sometimes known as “fintechs.”

Sen. Chris Belt, D-Swansea, the lead sponsor of the bill, said it is based on the federal Truth in Lending Act of 1968, which governs consumer loans. It requires nontraditional lenders to calculate and express the cost of the loan in terms of a standard annual percentage rate, or APR, even if the lender bases the loan around some other type of fee structure.

“There has never, ever been anything like the Truth in Lending Act on the commercial side,” Belt said on the Senate floor. “And so what this legislation looks to do is mimic the Truth in Lending Act on the commercial side. It ensures small businesses receive consistent and transparent disclosures on the cost of small business financing.”

At a news conference earlier in the day, credit reform advocates said in recent years, certain fintech firms have targeted small and minority-owned businesses, especially those in lower-income communities, with predatory lending practices in which the borrowers end up paying much higher fees and interest rates than they were led to expect.

Horatio Mendez, president and CEO of the Chicago-based Woodstock Institute, said that when he worked in the private financial lending industry, he often asked nonprofit and community-based lenders what a typical small business owner was looking for when applying for a loan.

“And more often than not, the response was, these small business owners and entrepreneurs needed help refinancing out of predatory loans that they didn't realize they had gotten into,” he said.

Senate Republicans opposed the bill, arguing its goal is to squeeze one particular kind of new, nontraditional lender out of the marketplace at the expense of larger, more traditional institutions.

“It will shrink the marketplace in Illinois, thereby giving fewer options to the small and medium-sized companies in our districts that need to borrow money,” Sen. Jason Plummer, R-Edwardsville, said. “It forces a lot of people out of the marketplace, and it gives a bigger chunk of the business to certain companies.”

The bill passed the Senate 36-19. It next goes to the House for consideration.

Advisory questions, ballot changes head to Pritzker

Democrats in the state Senate on Thursday approved a measure that would put three nonbinding referendum questions to voters on the November ballot, along with blocking established parties from putting candidates on the ballot if they did not go through the primary process.

Supermajority Democrats in the House quickly pushed Senate Bill 2412 through their own chamber the day before. Republicans in both chambers voted “present” on the bill in protest, while a handful of Democrats voted against it or skipped voting altogether.

State Sen. Christopher Belt, D-Swansea, introduces a bill to put more controls on certain kinds of high-cost loans to small businesses from nontraditional lenders. (Capitol News Illinois photo by Peter Hancock)

Republicans criticized the bill as a targeted attempt to block a mid-cycle GOP opponent for Democratic Rep. Katie Stuart of Edwardsville, whose 112th House district in the Metro East did not see a Republican run in the March primary. Both parties have used the slating process to strategically place a candidate on the ballot if they perceive the winner of the other party’s primary as beatable.

The House Republicans’ political arm last month announced Jay Keeven, the former Edwardsville chief of police, would challenge Stuart in the November Election. On Thursday, the party apparatus panned the measure as the “Katie Stuart Protection Act” in a statement announcing Keeven had collected hundreds of signatures in order to file his nominating petitions with the State Board of Elections “within just 24 hours” of the bill’s passage in the House.

Senate President Don Harmon, D-Oak Park, said Republicans’ concerns about the measure’s quick introduction and passage in the middle of a campaign cycle were misplaced. He said the bill would “end a corrosive practice,” alluding to the use of slating by the former powerful Democratic House Speaker Michael Madigan, who’s awaiting trial on federal corruption charges unrelated to elections.

“I want to emphasize we're not taking this away from Republicans; we're taking this away from everybody,” Harmon said. “We Democrats won't be able to slate candidates for the Senate in any districts where your members are running unopposed. It’s a problem with the practice.”

One of the three nonbinding advisory questions that would be put to voters in November under the bill would ask whether they’d favor civil penalties for any candidate who “interferes or attempts to interfere with an election worker’s official duties,” providing kindling for Republican State Sen. Steve McClure, R-Springfield.

“It's very ironic that a motion that contains a referendum on election interference actually interferes with a pending election,” he said. “That's what this bill does.”

Asked at an unrelated event Thursday whether he’d sign the bill into law, Gov. JB Pritzker didn’t specifically answer but instead characterized the measure as “actually an ethics bill.”

“It really does make sure that we don't have backroom deals to put people on the ballot and run as a result of, you know, some small group of people in a smoke-filled room making the choice,” he said. “To me, more transparency is better.”

In addition to the question about civil penalties for candidates who break election laws, voters would also be asked whether health insurance plans that cover pregnancy benefits should be required to cover in vitro fertilization and whether the state should adopt an additional 3 percent tax on income over $1 million “for the purpose of...property tax relief.”

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.