Monday, August 7, 2006

As even stronger payday loan regulations are being considered in Illinois, providers of these cash advances are making noise about restrictions already in place.

In 2005, Illinois passes The Payday Loan Reform Act; it limited interest rates to $15.50 for every $100 lent out. Customers also may extend an instant payday loan and pay more fees, according to the attorney general's office.

"Money is our commodity," said John McCarthy, owner of EZ Payday Advance on Elm Street in McHenry. "The customer is renting the use of our money, and it's up to him how he keeps it. It's up to him what it costs."

Illinois lawmakers have led national efforts to protect customers from quick payday loan companies who charge excessive rates.

"The overall goal simply is to prevent people from remaining in a cycle of short-term loans," said Deborah Hagan, the division chief for consumer protection for the Illinois attorney general's office. "The goal is not to eliminate the product."

However, Peg Zang said lawmakers went too far. Zang owns Universal Cash Express on Eastwood Drive in Woodstock, which stopped granting payday loans in December because of the strict limits.

Zang said a single mother facing financial problems recently came to her store seeking a loan using her car title as collateral. Zang said she was uncomfortable granting the loan because she suspected that she eventually would have had to take the vehicle.

"I'm not out to get those kinds of people," Zang said. "I refer them to other agencies. I try to give those people information as to where they can go for help."

McCarthy said he did not give out same day payday loans to customers who already were borrowing elsewhere. Clients had to prove that they were employed and had enough income to repay the loan, he said.

Moreover, people sometimes have unforeseen medical bills or car troubles and cannot afford to wait for their next paycheck, McCarthy said.

"Where does the guy go? If he can't fix his car, he can't go to work. The bank doesn't want him. They can't afford the paperwork to [lend] $500."

Although payday loan stores are not as common in McHenry County as they are in cities such as Chicago and Rockford, about a dozen are operating.

In Crystal Lake, workers at USA Payday Loans, 40 W. Terra Cotta Ave., use a buzzer to unlock the door for potential customers. Warnings about the dangers of short-term loans adorn a wall at West Suburban Currency Exchanges on Randall Road in Lake in the Hills, where workers sit behind bulletproof glass. Employees at both stores said they could not comment about their payday advance business.

Fabian, the credit counselor, said the payday loan industry targeted anyone who was short on money.

"It's everybody," Fabian said. "Younger clients, older clients, single, married. These loans don't discriminate."

Yet Steve Brubaker, the executive director of the Illinois Small Loans Association, said the state's reforms would not make people's money problems disappear.

"They've done nothing to remove that consumer's need for short-term credit," Brubaker said. "People will revert to what they did before the payday loan industry came along, and that's bouncing checks and incurring overdraft fees."

In other words: The problem isn't necessarily pay day loans, but rather WHY people need them in the first place.

This entry was posted on Monday, August 7th, 2006 at 2:18 pm and is filed under Illinois.