Chalk One Up for Payday Loan Companies After Sangamon County (Ill.) Court’s Ruling
By Desmond CarlislePayday Loan Writer
A Sangamon County (Ill.) judge halted the state's attempt to revoke the licenses of four payday loan companies that officials said were trying to circumvent payday lending reforms enacted last year, reports the Lincoln Courier.
Circuit Judge Patrick Kelley said revocation by the Department of Financial and Professional Regulation took place weeks after he issued a temporary restraining order blocking the state from enforcing parts of the new Payday Loan Reform Act.
Kelley said the revocation could be construed as an attempt to enforce the payday loan law and related rules issued by the agency in violation of the Court's February 10, 2006 edict. In doing so, the court would be unfairly applying rules to quick payday loan providers.
The judge vacated the revocation order, but said that Illinois could still try to revoke the licenses if it could find a way to do it without relying on the payday advance loan reform laws. DFPR spokeswoman Susan Hofer said the state wants a clarification of the order.
"We are preparing a motion to reconsider. We fully intend to comply with the temporary restraining order, but we also want to be able to enforce the law. We're confident the judge does not mean to imply the department should not enforce state law," Hofer said.
In late March, the state moved to revoke the licenses of four Payday Loan Stores of Illinois, Inc. outlets. Among other things, the state said the stores falsified signatures, made loans to people with invalid Social Security numbers and discarded statements that must be given customers under the payday loan reform laws.
However, attorneys for the Illinois Small Loan Association said the state was improperly extending payday loan reforms to another class of loans - called consumer installment loans - and the companies that issue them. Consumer installment loans are covered by another part of state law.
"What the state wanted to do is apply the payday loan act to the consumer installment loan act. That's what the court found they could not do," said Steve Brubaker of the Illinois Small Loan Association.
The Payday Loan Stores of Illinois are owned by Robert Wolfberg, president of the Illinois Small Loan Association. In court papers, ISLA attorneys said the state began investigating the Payday Loan Stores within weeks of the ISLA joining a lawsuit challenging the way reforms against fast cash loans were being enforced by the state.
After a contentious and lengthy fight, the General Assembly in 2005 approved a series of reforms for payday loans, including a cap on the size of a loan, a limit on the interest that can be charged and restrictions on how many instant payday loans a person can have at one time.
The reforms took effect Dec. 1, 2005. Soon after, the department issued rules that applied certain parts of the payday loan reform rules to consumer installment loans. Consumer installment loans typically run 120 days or longer, while payday loans (by definition) are for fewer than 120 days.
State officials argued that the new rules help prevent payday lenders from trying to circumvent reforms. However, seven lending businesses have filed suit, saying the state's regulating agency overreached its authority by issuing the rules. It was in response to that lawsuit that Kelley issued the temporary restraining order in February.
