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Three Years Into Illinois Rate Cap, Lender Licenses Are Down 64 Percent, Highlighting How Rate Cap Has Significantly Diminished Consumers’ Access to Credit

By March 21, 2024No Comments

-Total Licenses Dropped From 1426 in 2021 to Only 512 Today, Leaving Cash-Strapped Consumers With Fewer Options Than Before Rate Cap’s Implementation-

ARLINGTON, Va. (March 21, 2024)—As the enactment of Illinois’ “all-in” 36 percent annual percentage rate cap marks its third anniversary, new data from the state shows a continued, clear decline in credit options and availability for Illinois consumers.

Proponents of the so-called Predatory Loan Protection Act continue to claim that the law is a great success and that consumer lending options are expanding in Illinois. However, data obtained from a Freedom of Information Act request shows that lender licenses in general declined by 64 percent from March 2021 with installment licenses down by 51 percent. As of March 1, 2024, only 512 lender licenses are currently issued in the Prairie State, a precipitous decline from the 1,426 licenses in place on March 1, 2021. Installment licenses during that same duration fell from 1,037 to 508.

Furthermore, among the roughly two dozen “new” licenses that were issued since last year, it would appear that only one new registrant offers a consumer loan product. Otherwise, the vast majority of these companies do not offer credit to consumers while the rest are renewals and duplicates.

“For the third straight year, the number of credit options available for Illinois consumers has dropped, leaving most borrowers unable to access money when they need it,” said Andrew Duke, Chief Executive Officer of the Online Lenders Alliance. “Demand for the credit products they enjoyed prior to the rate cap has not declined, but the data shows that their options have. And while opponents of these products claim new lenders are meeting the continued demand, the minimal number of new lenders who have entered the marketplace are not offering the credit products many consumers need to meet their financial obligations.”

On March 23, 2021, the PLPA was signed into law, capping interest rates on consumer loans in the state at an “all-in” 36 percent annual percentage rate. An academic study released last year by three leading economists determined that this law decreased the number of loans to subprime borrowers by 44 percent while increasing the average loan size to subprime borrowers by 40 percent.

The study also included data from an OLA survey of previous borrowers who had taken out loans with APRs exceeding 36 percent; this data showed that most of those borrowers have since been unable to borrow money when they need it, with 80 percent of respondents wanting the option to return to their previous lender, most of whom are no longer in the marketplace. OLA is the only organization surveying borrowers who have actually used small dollar loans in Illinois to shed light on the rate cap’s impact.

In a second survey, conducted between June 13-16 last year and included as an Appendix to the report, OLA sought comments from previous loan users to get a better understanding of their experiences in Illinois under the rate cap. Many consumers lamented the fact that there were now few available credit options. One consumer said that when unable to borrow money, they went without food and failed to pay their electric bill. Another lost a storage unit containing personal items. And a third was faced with a foreclosure hearing on their home.

“It’s clear that too many consumers have been forced into less desirable options to meet their credit needs, and they overwhelmingly want more choices to manage their financial situations,” Duke said.

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