Research shows consumers continue to access credit after 36% rate cap on short-term loans
The Woodstock Institute has published results of a statewide poll in Illinois that indicates consumers in the state support the Predatory Loan Prevention Act. The law, which took effect last year, caps interest rates on short-term loans (like payday loans) at 36%.
Among the key findings of the survey:
- 86% of Illinois residents support price cap. Support was extremely strong among Democrats, Republicans and independents.
- Illinois consumers, including low-income adults, continue to have access to credit. Almost two-thirds of low-income adults (62%) and more than two-thirds of all adults (69%) have been able to borrow money since the rate cap came into effect.
- Consumers who have needed emergency cash since the rate cap came into effect have used a variety of methods to meet their needs. Using a credit card was the most common method (24% of low-income adults and 27% of all adults). Consumers also used methods that did not involve taking on more debt. The second most common method was using personal savings (23% of low-income adults and 22% of all adults).
Survey respondents indicated that the rate cap has created a safer lending environment in Illinois.
“A few years ago, I usually used high interest payday loans,” said Tanekia Smith, one of the survey respondents. “I would borrow $500 and pay off the loans sooner. If I hadn’t, I would have ended up paying back $1,000 each time. I support the 36% rate cap because I believe credit should be safe, especially for vulnerable consumers and people who are already struggling.
An Illinois congressman said experience in the state points to the need for a national 36% cap on interest rates on short-term loans.
“Being poor in America simply costs too much, and working families deserve protection from predatory lenders. It’s a shame to see families in vicious circles of debt because they have to take out a loan to pay their rent or a utility bill,” said Congressman Chuy García, the main sponsor of the legislation to establish a national rate cap of 36% APR.
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