Illinois Caps Consumer Loan APRs at 36 Percent
Last week, Illinois Governor J.B. Pritzker signed a bill capping annual interest rates on all consumer loans at 36 percent. The Governor’s office said that auto title loans in the state currently carry an average annual percentage rate of 179 percent and payday loans have an average APR of 297 percent.
Pritzker also signed a law that establishes standards for state regulators to assess lending by credit unions, state-chartered banks, and nonbank mortgage lenders in economically disadvantaged communities. Both bills are part of a package of laws to address racial-equity gaps in Illinois.
“While there is more work to do, we are a better state for what’s in this legislation today,” said Pritzker in a written statement.
As reported in American Banker, the rate cap makes Illinois the 18th state to limit interest rates to 36 percent. The rate cap will apply to all consumers, but it is contingent on definitions set by the Military Lending Act⎯a federal law that applies to loans made to servicemembers and their families⎯because the military annual percentage rate has more fees than a standard APR.
Other bills that Pritzker signed into law address improvements to public housing, discrimination by employers against people with criminal records, and access to state contracts for minority-owned businesses. Also, the Illinois reinvestment law is intended to incentivize safer lending into low and moderate-income communities.
The legislation takes effect immediately.