Progressive and Conservative Legislators Unite to Protect Against Exploitative Loans

By: Rep. Will Guzzardi (D-Chicago) & Rep. Andrew Chesney (R-Freeport)

We are two legislators who don’t agree on a lot.

One of us is a Chicago Democrat who co-chairs the Illinois House Progressive Caucus. The other is a Northwest Illinois Republican who is a firebrand for Conservative causes.

Despite these obvious ideological differences, this summer we joined forces on an issue that matters deeply to both of us: curbing excessive interest rates on payday loans.

A payday loan is a short-term loan that is supposed to be meant to keep a family afloat until the next paycheck comes in. It is intended to be a tool of last resort for people whose backs are against the wall.

The payday lending industry knows their customer base are desperate, and they have been insufficiently prevented from taking advantage of that desperation. Payday loans could be issued at annualized interests rates over 400%.

Title loans are no better — and maybe even worse. With similarly staggering interest rates, these products are secured by the title on one’s car. Failure to pay usually results in forfeiture of one’s vehicle.

Most of the big players in payday and title lending are big out-of-state chains who come into our communities, extract money from our most vulnerable neighbors and give little back in return. They take advantage of desperation, knowing that the high default rate on their loans puts their customer base in cascading financial peril while they continue to profit.

Since last summer, we worked with a group of advocacy organizations to tackle this issue. The Heartland Alliance, the Woodstock Institute, and other groups provided meaningful assistance to us in crafting a proposal to cap interest rates on these products at 36%. That is still awfully high — double what you might pay on even credit card debt — but it begins to protect those who are being exploited by shady out-of-state lenders.

While significant ideological rifts exist on major tenets of the economic justice pillar of the Black Caucus agenda passed in January, this short-term lending reform was one proposal that attracted broad bipartisan support from both the very conservative like me (Andrew) and the very progressive like me (Will). The reform measure passed, and it is currently awaiting the Governor’s signature.

We think, no matter where you are on the ideological spectrum, you can agree that 400% annualized interest is outrageous. The hardships placed on vulnerable Illinoisans by these lenders of last resort is wrong. Whether you are a progressive or conservative, or simply care about your fellow Illinoisans’ well-beings, we believe this measure will make our state a better, fairer, and more decent place.