Payday lenders say they're ignored

by Mary Wisniewski

A group of Illinois payday lenders says it wants its proposed changes to a reform bill to be taken seriously before the bill comes up for a committee vote in the Illinois House of Representatives, now scheduled for Tuesday.

"We would have liked for them to negotiate with us instead of just blowing us off," said Bob Wolfberg, president of the Illinois Small Loan Association. Wolfberg said an amended version of the bill, released late Friday, took none of the group's suggestions except for some minor, technical ones.

"We felt we were making great progress," Wolfberg said.

The sponsor of the bill, Rep. David Miller (D-Dolton), said he's frustrated by trying to satisfy the small-lender group, which has held up reform legislation in the past.

"It's been a moving target to make ISLA happy," Miller said. "My impression is they just want to delay and don't want the bill at all."

Miller believes the reform bill would pass the 30-member House financial institutions committee, though he expects the vote will be tight. "Those who vote 'present' or 'no' will have to explain why," Miller said.

The bill is intended to prevent fees on small consumer loans from soaring out of control. The loans can cause problems when a borrower fails to pay back the loan in an agreed-upon time period and re- finances over and over, racking up enormous fees.

A Chicago Sun-Times investigation last summer found dozens of cases where small loans turned into crushing debts: One woman who took out a $1,000 cash loan ended up owing $10,743, mostly in accumulated interest.

The proposed bill places a cap on finance charges at $16 per $100 loan, as opposed to the current average fee of $44 for a 31-day period. It would also limit the amount a consumer could borrow based on income and cap the number of loans a consumer can have outstanding, along with other measures.

A spokeswoman for Gov. Blagojevich said the governor is very interested in getting some form of bill passed this session.

"Rep. Miller's bill sets the stage and brings up important issues, and we'll work with him to pass something meaningful this session," said Abby Ottenhoff, a spokeswoman for the governor.

Consumer advocates behind the new law say this bill has a better chance of passing than previous efforts because it is supported by both consumer advocates and a national payday lending group -- the Community Financial Service Association -- and is fair to both consumers and lenders.

This has been disputed by the Illinois Small Loan Association, which claims the CFSA is using the legislation to drive small lenders out of business.

CFSA says it represents about 60 percent of the national payday- advance business, including big lenders like publicly held Advance America Cash Advance Centers Inc., while the Illinois group says it represents about 80 percent of payday lenders in the state.

"This is a battle between mom-and-pop lenders from Illinois and out-of-state lenders from Tennessee and South Carolina," Wolfberg said. "We are negotiating for our lives."

One sticking point for the ISLA is the interest cap. Wolfberg said the ISLA believes the market sets the rate best, and that the problem with setting a statewide cap is that the dollar is worth less Downstate than in Chicago, prejudicing Chicago lenders.

WHAT IS A PAYDAY LOAN?

A payday loan is a short-term loan for a small amount of money -- usually between $100 to $1,000 -- from a storefront lender. Borrowers submit a pay stub and a bank statement. The average fee in Illinois is $44 per $100 borrowed on a 31-day loan, according to consumer advocates.