Governor’s Proposed Payday Loan Restrictions Shot Down By Illinois Legislative Committee, 9-3
By Paul RizzoPayday Loan Writer
Members of an Illinois legislative committee blocked Gov. Rod Blagojevich's administration from imposing restrictions on short term payday loans and complained that the agency director pushing for the highly-touted change was politicizing the issue.
Earlier in the year, the Dept. of Financial and Professional Regulation proposed rules they said would stop lenders from skirting a new law regulating the terms of payday cash loans. To get around the law, short-term lenders allegedly steer borrowers toward longer installment loans instead — so they can charge the exorbitant interest rates.
But the Joint Committee on Administrative Rules (JCAR) voted 9-3 to nix the proposed rules, which would have taken effect as early as next month.
Some members questioned whether Blagojevich even has the authority to make such a move under the Consumer Installment Loan Act. Other members of the panel bristled when the Secretary of Financial and Professional Regulation, Dean Martinez, delved into the plight of borrowers before a packed hearing.
State Rep. Larry McKeon (D-Chicago) called the speech "insulting," while Rep. Dave Leitch (R-Peoria) said that Martinez acted with "self-righteous arrogance."
Sen. Steve Rauschenberger (R-Elgin), another JCAR member, said he trusts JCAR staff who say Martinez's agency has the statutory power to regulate Illinois payday loans in this fashion. He complained, however, that the department did not provide details to committee members before Tuesday's meeting.
Martinez said he did not mean to offend the lawmakers, all of whom support payday advance loan reforms. He promised to try to meet with each of them before JCAR's August 8 meeting in an effort to rally the seven votes needed from the 12-member panel to lift the rule prohibition.
"I have deep respect for all of our elected officials - I actually like 99.9 percent of them. I know they may feel we put them in a difficult spot, but we're trying to do what's best for consumers," Martinez said.
Meanwhile, JCAR member and Rep. David Miller (D-Dolton), who backed the agency, is working on a compromise with lenders who stand opposed to the new restrictions. He said his solution would clearly define the interest rate under which a lender is barred from using collection techniques such as wage garnisheeing. The Blagojevich agency had proposed 36 percent.
Miller said he hopes the compromise will be ready by August 8, but a payday loan company spokesperson expressed doubt it would satisfy his group, the Illinois Small Loan Association (ISLA).
"Our concern is any compromise reached has to be a legislative compromise approved by the full General Assembly," Executive Director Steve Brubaker said. "They can't just take this rule and tweak it and throw it out there."
JCAR is comprised of six Republicans and six Democrats, and the bipartisan blockade against the Blagojevich administration Tuesday comes a couple of weeks after the governor publicly chided the panel for having what he called "a tradition of being friendly" to the quick cash advance firms.
Blagojevich, who himself has taken campaign contributions from the payday loan industry in the past, made the comment to the Associated Press last month while making an argument for the new rules.
"If I was Rod Blagojevich, I would not be making comments like those," said Sen. Dan Rutherford (R-Chenoa), a JCAR member. "We have a separation of powers, and I am a member of a co-equal branch of government."
