Los Angeles, CA (Vocus) July 29, 2010
As our payday loan states article we published earlier, back in June 21st, Illinois governor Pat. Quinn, signed State Law HB 537, which is a bill that supposedly closes a loop hole in that State's 2005 Payday Loan Act. That bill had passed the general assembly unanimously back in May. This law
This regulation also regulated payday loans in that State that imposes a 99 percent APR cap on the loans and all loans must be under $4000. As the result many payday lenders have downsized the business and some have even closed because that cap is simply not profitable for them.
Although 99 percent APR sounds like a high interest rate, but that is fundamentally wrong to apply APR which stands for Annual Percentage Rate, to a short term loan such as payday loan that is due in two weeks or less. Payday lenders usually look at their loans interest rates as fees just like as overdraft fee except that payday loans fees are much less than over draft fees.
According to payday lenders downsizing, the demand of small loans are on the rise in that State as the result the State is considering and weighting a "small loan bill" which enables banks and credit unions to provide the same type of short term loans with less fees and interest rates.
The way the bill seems to work is that State banks will be contributing funds to a "small loan pool" to State Assembly where from that loan pool, State will give loans directly to needy families with low fees and interest rates. Banks will get tax right off end of the year from the State and also will clear and improve their image with their people.
Many critics of this bill are worried that this will add more to State governments bureaucracy, which at the end could cost the State Tax payers. This story is developing so we make sure we keep you updated on this payday loan blog as it develops.