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Changes of payday lending legislation in Illinois

The term payday loan is defined as a cash advance loan provided for a short term and charged with an interest rate and financial fees. As interest rates for this type of loan are rather high, borrowers can feel uncomfortable when taking payday loans. The authorities of Illinois try to take cake about the State citizens and adopt new regulations in order to secure them against predatory lending operations.  Although payday lending business is legal in Illinois, there are a lot of restrictions and limitations to which borrowers, lenders and collectors are required to conform. Generally these restrictions are aimed at limiting the financial fees that lenders can charge their customers. At present the lending legislation is being changed in the State, and the main goal of these changes is to protect borrowers.

In accordance with the Illinois legislative acts a customer can take a loan with the amount of maximum of $1,000 (which makes up 25% of an income per month including taxes). He is allowed to borrow 1 or 2 loans at one time.

The repayment term of a payday loan can range from 13 to 45 days in Illinois. Rollovers are forbidden in the State, particularly when a borrower wants to extend repaying the second payday loan. The term cooling-off period is applied in the industry and means that a borrower can take another loan only in case one week has passed after he paid off the previous loan.

A financial fee not exceeding $15.50 should be charged for a $100 payday loan. Criminal suits against payday customers are forbidden in the State. Those clients who have failed to repay a loan until the deadline should be provided with a repayment plan. Under the law a payday lender is only allowed to lodge a complaint against a borrower who defaults on payments after 28 days have passed. Additionally, lenders are prohibited to confiscate any of a borrower’s property in return for repayment. They are either not allowed to claim a borrower to pay damages for covering court or attorney expenses.

The General Assembly of the State has changed the legislation of payday lending industry this year. The new bill tries to decrease the amount of money borrowers should spend for paying financial charges to payday lenders. The bill has got a name HB 537 and is adopted by both legislator houses. It states that an annual interest rate for a payday loan which exceeds 99% is not legal since this year. Furthermore, a loan’s sum should correspond to the borrower’s income above all. However, these new measures have become unfavorable for Illinois payday lenders now, because they won’t be able to establish three-digit annual percentage rates any more.