Early this morning, the Illinois legislature passed and sent Governor Pritzker for signature, one of the most restrictive consumer loan bills seen in decades that, if signed, will have far-reaching implications not only for the payday lending and subprime lending industry, but also the main traditional lenders.

Illinois Senate Bill 1792 (“SB 1792”) contains, among other things, the “Illinois Predatory Loan Prevention Act” (“ILPLPA” or the “Act”) which will impact all lenders in the United States. ‘State. Below is a very brief bulleted summary of the main content of ILPLPA.

Illinois Predatory Loan Prevention Act

The ILPLPA contains the following significant changes to the existing Illinois Consumer Installment Loans Act (“CILA”),1 the Illinois Sales Finance Agency Act (“SFAA”),2 and the Illinois Payday Loan Reform Act (“PLRA”)3:

  • Imposes an interest rate cap of 36%, calculated in accordance with the Military Loans Act4 on all loans, including those made under CILA, SFAA and PLPRA;
  • Eliminate the $ 25 document preparation fee on CILA loans;
  • Repeals CILA’s small loans section that previously allowed small loans over 36% up to $ 4,000;
  • Affirms its competence in banking partnership programs if:
  • the person or entity owns, acquires or retains, directly or indirectly, the predominant economic interest in the loan;
  • the person or entity markets, negotiates, arranges or facilitates the loan and has the right, requirement or first right of refusal to purchase loans, receivables or interest on loans;
  • the totality of the circumstances indicates that the person or entity is the lender and that the transaction is structured in such a way as to escape the requirements of this law. Circumstances that work in favor of a person or entity as a lender include, but are not limited to, when the person or entity:
  • indemnify, insure or protect an exempt person or entity from all costs or risks associated with the loan;
  • designs, controls or primarily operates the loan program; Where
  • purports to act as an agent, service provider or otherwise for an exempt entity while acting directly as a lender in other states.

Although the provisions of the law attempting to eliminate the original online banking model will certainly become the subject of debate, particularly in light of the ongoing litigation regarding the regulation of the Office of the Comptroller of the Currency in this regard. which relates to the “real lender” doctrine, if promulgated by Governor Pritzker, the imposition by the ILPLPA of the country’s first annual military percentage rate of 36% on all CILA, SFAA and PLPRA licensees, will require any person operating under these laws to review and modify their compliance management systems in response to the law.

Governor Pritzker has sixty (60) days to sign or veto SB 1792. The law will come into force upon signature by the Governor.

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