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Activists Seek to Take Down Predatory Pawn Brokers in Illinois
Interest rates exceed 200%
A coalition of leaders from various advocacy groups came together today to express support for legislative efforts to cap pawn broker loans at 36% interest rates — instead of the 243% currently charged as a result of a loophole in the Predatory Loan Prevention Act.
“The pawnbrokers are waging an aggressive campaign alleging that consumers need their predatory loans,” State Senator Jacqueline Y. Collins (D-Chicago) said. “Don’t be fooled. The pawnbrokers are trying to protect their millions, not the Illinois consumer.”
According to the Woodstock Institute, Illinois families paid over $44 million in pawn loan fees in 2020, which is more than 8 times as much as payday loan fees in 2020.
“When the Predatory Loan Prevention Act was passed it was meant to protect consumers from all abusive lending practices but pawnbrokers have continued to take advantage of Black, Latino, and Low-income communities,” Teresa Haley, President, NAACP Illinois State Conference said. “Legislators can take action today to help end this abusive practice by passing a law that closes a loophole that should have never existed in the first place.”
“Every day, these predatory loans are extracting thousands of dollars from families in need,” said Monsignor Doug Hennessey, Diocese of Peoria. “We urge the General Assembly to take immediate action to stop this injustice.”
Recently published research suggests that pawnbrokers are taking advantage of the loophole in the Predatory Loan Prevention Act to overcharge distressed borrowers.
The Woodstock Institute released the results of an investigation showing that Illinois pawnbrokers are overcharging active-duty servicemembers, who have long been protected (or meant to be protected) by a federal law that caps the interest rate on loans to active-duty servicemembers at 36%. In the course of the investigation, pawn shops charged 240% APR or higher in 19 out of 20 transactions.
There are also emerging alternatives to these high-cost loans.
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SoLo Funds and the Quest for Fancy Predatory Lending
An online lending platform known for interest rates in excess of 4000% APR is asking its customers to sign a petition to allow the company to continue preying on desperate borrowers.
SoLo Funds — a fintech lending platform — has started a change.org petition in an attempt to fight back against state regulators attempting to shut down the company due to its predatory practices.
Sounding Economic Alarm Bells
The Consumer Financial Protection Bureau (CFPB) this week released its annual analysis of household financial health. For the first time since 2019, this year’s report shows American household financial health declining.
On a number of key indicators of financial health, a significant number of American households reported troubling information.
The key takeaway from the survey is that while unemployment remains low, nearly 40% of American households are not prepared to handle a disruption in their main source of income.