In the state of Illinois payday lending is considered legal.
Illinois has a limit on the amount of a classical payday loan: $1,000 or 25% of the gross monthly income, whichever is less. Loans can be taken from 13 days up to 120 days. Finance charges should not exceed 15.5% per $100 borrowed. However, actual APR in the state nears 404%*. Criminal actions are prohibited.
The state of Illinois offers 3 payday loan products at the moment: a small consumer loan with APR not more than 99%, payday installment loans that last up to 6 months and have an APR up to 400%, and payday loans (according to the website of Illinois Attorney General).
These regulations with regard to the industry were introduced after HB 537 passed and became effective on March 21, 2011. It amended the Payday Loan Reform Act (PLRA) to create Installment Payday Loans and it also amended the Consumer Installment Loan Act (CILA) to create Small Consumer Loans.
Illinois Payday Lending Statutes
Payday lending is considered legal in the state of Illinois (815 ILCS 122/1-1 et seq.).
The Illinois Department of Financial and Professional Regulations (IDFPR) keeps a database of all Illinois payday loans. It is required that all lenders checked the database before issuing a new loan to a consumer and also entered the information regarding the new loan types into the database. The database was created with the idea to eliminate abusive practices of payday lending and bring more order into the industry.
Loan Amount in Illinois
“No lender may make a payday loan to a consumer if the total of all payday loan payments coming due within the first calendar month of the loan, when combined with the payment amount of all of the consumer’s other outstanding payday loans coming due within the same month, exceeds the lesser of:
- (1) $1,000; or
- (2) in the case of one or more payday loans, 25% of the consumer’s gross monthly income; or
- (3) in the case of one or more installment payday loans, 22.5% of the consumer’s gross monthly income; or
- (4) in the case of a payday loan and an installment payday loan, 22.5% of the consumer’s gross monthly income.” (815 ILCS 122/1-1 et seq.).
- It is forbidden to take more than 2 loans at a time.
Rates, fees and other charges in Illinois
“(e-5) Except as provided in subsection (c)(i), no lender may charge more than $15.50 per $100 loaned on any payday loan, or more than $15.50 per $100 on the initial principal balance and on the principal balances scheduled to be outstanding during any installment period on any installment payday loan.” (815 ILCS 122/1-1 et seq.).
APRs for payday loans in Illinois can reach 404% (*According to the Center for Responsible Lending 2019: “Typical APR based on the average rate for a $300 loan advertised by largest payday chains or as determined by a state regulator, where applicable.”).
Maximum term for a payday in Illinois
- In Illinois, you one can take a payday loan for a term from 13 up to 120 days.
- Rollovers are prohibited especially if they are meant to extend the repayment period of another payday loan.
- A cooling-off period means that you have to wait 7 days after 45 days of having a loan (except for installment payday loans.) Otherwise, you will not get the next loan.
- An installment payday loan should be offered for a period of not less than 112 days and not exceeding 180 days.
- Criminal charges are prohibited in the state of Illinois.
- In case of NSF to pay a check, a lender may charge a fee not to exceed $25.
- “(f) A lender may not take or attempt to take an interest in any of the consumer’s personal property to secure a payday loan.” (815 ILCS 122/1-1 et seq.).
The Illinois Department of Financial and Professional Regulations (IDFPR) regulates the
The History of Payday Loans in Illinois
- 2000 – “Illinois passed a law to rein in payday lenders with the law regulating loans with terms less than 30 days; payday lenders bypassed the law by extending the length of the loan to 31 days.”(Paydaylendingfacts.org)
- 2005 – Before the Payday Loan Reform Act (2005), payday lenders were largely unregulated in Illinois. The PLRA prohibited unlimited rollovers and set that payday loans must be based on a borrower’s ability to pay. The law regulated loans with terms less than 120 days. However, payday lenders began offering loans for longer terms to avoid the
- 2005 – now – Triple-digit APR installment payday loans became common.
- 2006 – The Military Lending Act effectively capped payday loans offered to the military at 36% APR. No lender in Illinois is now allowed to offer loans to the military in excess of 36% APR.
- March 21, 2011 – HB 537 It amended the Payday Loan Reform Act (PLRA) to create Installment Payday Loans and the Consumer Installment Loan Act (CILA) to create Small Consumer Loans.
- The Illinois Payday Loan Reform took hold in 2011 and the situation stays the same since then.
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (the federal rule is expected in November 2020).
(As of April 2019)