Illinois passes 36% rate cap on consumer loans, creates state community reinvestment law

On March 23, the Governor of Illinois signed the Predatory Loan Prevention Act, SB 1792, which prohibits lenders from charging more than 36% APR on all non-commercial consumer loans under $ 40,000, including closed and open credits, retail installment contracts, and installment sales contracts retail of motor vehicles. For the purpose of calculating the APR, the law requires lenders to use the military annual percentage rate calculation system under the Military Loans Act. Any loan with an APR greater than 36 percent will be considered null and void “and no person or entity shall have the right to collect, attempt to collect, receive or retain principal, charges, interest or loan costs. ” Additionally, a violation constitutes a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act and is punishable by a fine of up to $ 10,000. The law also contains an anti-avoidance provision that prohibits persons or entities from “making loans disguised as a transaction of sale and leaseback of personal property; disguise of the loan proceeds as cash back for the pretextual installment sale of goods or services; or make, offer, assist or organize a debtor to obtain a loan with a higher rate or interest, consideration or charges than those permitted by this Act by any means, including mail, telephone, Internet or any other electronic means, that the person or entity has a physical location in the State. “

On the same day, the governor also signed SB 1608, which, among other things, creates an official version of the Community Reinvestment Act. The law will allow the state to assess whether covered financial institutions, including state chartered banks, credit unions and non-bank mortgage lenders, are meeting the needs of local communities, including low-income neighborhoods. income and moderate income. Lending practices of financial institutions and investments in community development / redevelopment programs will be reviewed by the Secretary of Financial and Professional Regulation, who is empowered to conduct reviews in accordance with other federal and state fair loan laws, including including, but not limited to, the Illinois Human Rights Act, ECOA, and HMDA.

Both acts come into force immediately.

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