Payday Loans Debt Consolidation

Payday Loan Reform Act In Illinois

In order to provide protection to its consumers from predatory payday loan programs, the state of Illinois passed the Payday Loan Reform Act. As per this act, certain restrictions have been imposed on lenders that offer such loan programs. At the same time, the borrowers have also been powered with some special legal rights. Awareness about these laws is very important for those who are either considering taking short-term cash advances or are already trapped into the seemingly never-ending cycle of debts caused by such loans. The laws have been effective since December 8, 2005. Following is a brief rundown on some of the key points of this landmark legislation.

How Much Lender Can Charge?

As per the laws applicable in the state of Illinois, it is quite illegal for lenders to charge more than $15.50 on every $100 of payday loan. Even if you fail to make the repayment on the set due date, they cannot charge you more for this. No further charges can be added. All they can do is just to mark your loan status as “in collections”, which follows different legal provisions.

Minimum Period

As per the Payday Loan Reform Act, the term of the loan must not be less than 13 days in any case; it can be more.

Lenders Are Prohibited To Grant Loan To Certain Types Of Consumers

The laws in the state of Illinois has also prohibited lenders from approving loans to those consumers who are likely to get into debt because of that loan to one or more payday loan companies for over forty-five consecutive days. In other words, the consumer must first pay off all outstanding loans taken in a 45-day period in order to qualify for another payday advance. Besides that, those consumers are also not eligible for new payday loans if they an outstanding balance on two short-term cash advances. If the lenders violate these provisions and offer you a new loan, you will only be liable to pay the principal amount; you cannot be made liable to pay interest or other charges on such loans.

Wait Period

Even after you pay off all your loans taken within the 45 consecutive day period, it is legally mandatory for the lenders to wait for at least seven calendar days before issuing a new loan in your name.

Maximum Limit

The Illinois Payday Loan Reform Act of 2005 has also imposed restrictions on the maximum amount of loan that can be issued in a consumer’s name. As per the laws, the maximum limit for the loan amount must not be more than twenty-five percent of the gross monthly income of the consumer and must not exceed $1000 in any case.

The Legal Rights To Consumers

Consumers have also been provided certain legal rights in connection to payday loans. For example, you have the right to redeem a check for two days without needing to pay any charges.

The Provision For Repayment Plan

If you are unable to make the repayment on the set due date, you have the right to request for a repayment plan which the lenders must honor. The repayment plan must allow you to pay off the outstanding balance in several installments. The Payday Loan Reform Act in Illinois has made things very specific here – you are entitled to enter into a repayment plan if you have been in payday debt for thirty-five days. The new plan must allow you to make the repayment in small installments within a 56-day period. These are not monthly installments. You can pay as per your convenience; it is just that you must pay off the entire balance within a maximum fifty-six days.

No Charges Can Be Imposed For A Repayment Plan

The lenders are strictly prohibited from imposing any additional financial charges (including interest and late fees) for any repayment plan you agree to.

The Payday Loan Reform Act has also provided special protection to the members of the military. Certain activities that payday lenders usually get involved into have been banned deferral of collection or wage garnishment.


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Posted in Payday Loan Laws, Payday Loans Debt Consolidation | 1 Comment »

One Response to “Payday Loan Reform Act In Illinois”

  1. Macc says:

    Very wisely described. Pay day loan comes with some very attractive offers and once a person takes these offers he/ she finds his/ herself in a non ending cycle of the debt trap. All such things makes pay day loans a really horrible experience. Illinois state authorities understand the whole situation very deeply and they have a pay day loan reform act to save their people from pay day loans. It is very necessary to do a thorough study of all the laws of this Reform Act. The creditors can not charge very high interest; they are restricted to charge interest up to a certain limit. The duration of loan can not be less than 13 days. If a consumer already has a loan, another loan can not be granted to him. The creditors have to offer a repayment plan if you are not in the position to repay the loan, the laws of state are very clear regarding repayment option for the debtors. The creditors can not charge any thing extra for the repayment plan, they can no take any extra fees or interest for this extra time period.

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