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.

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War is bad enough, Alexi Giannoulias, argues - soldiers shouldn't have to return home to high-interest military payday loan payments, as well.

Giannoulias is a Democratic candidate for Illinois treasurer. He wants to make bank loans easier to obtain for state soldiers, especially those who muster out of the service after returning from Iraq or Afghanistan.

During a press conference Friday in Belleville, Giannoulias outlined a plan to supplement current faxless payday loan programs for members or past members of the Illinois National Guard and Illinois residents who are members of the U.S. Army Reserve. To be eligible, a member of the military must be within six months of leaving the service.

If elected, Giannoulias said he would offer bankers the incentive of having state funds deposited in their banks if they will offer $10,000 loans at up to 7 percent to military personnel. He wants to reduce the amount eventually owed via military payday loans.

"If applicants have even the slightest blemish on their credit report or lack the necessary collateral, loans will be denied," said Giannoulias. "Our military personnel should not have to take out a high-interest loan from a payday loan store to cover their living expenses and wind up in an endless cycle of debt," he said.

The proposed plan will increase the repayment period from 24 to 36 months. Giannoulias cited a December 2004 New York Times study that showed up to 26 percent of military personnel have gone to payday advance loan facilities to get money.

Giannoulias said his plan will NOT cost taxpayers. Bankers will be encouraged to make riskier loans at up to 7 percent in return for having state funds deposited in their banks.

"The state treasurer's office will deposit funds into that financial institution," he said of bankers willing to participate in the program.

With payday loan restrictions being shot down in Illinois, the cash advance industry continues to make money in the state.

Illinois Attorney General Lisa Madigan and Thomas James, senior assistant attorney general in the office's consumer fraud bureau, spoke to community leaders gathered at the Peoria County Courthouse. Their main concern? Overall predatory lending.

"When people come to you seeking advice on financing a car or a mortgage, you can give them advice so they don't end up defrauded and getting into loans they can't afford," she said.

Minorities and women especially are targeted by these faxless payday loan lenders. One document distributed by Madigan defines predatory lending as "making a loan that the borrower does not need, does not want or cannot afford. The primary benefit of the loan always goes to the lender, not the borrower."

Practices included within this predatory field include:

- Auto financing by dealers that charge interest rates much higher than a person would get from a bank or credit union.

- Payday loans - such as no fax needed payday loans - with extremely high interest rates.

- Mortgage practices including use of high fees and deceptive paperwork to disguise the true amount of the loan, as well as interest-only loans, balloon payments, some adjustable rate mortgages, prepayment penalties, and the newest scheme, option payments.

We'll keep you apprised of devolpment regarding these mortgages and other cash loan changes in the state.

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."

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Two lawmakers from Chicago's south suburbs will be instrumental in helping shepherd the rules proposed by Illinois Gov. Rod Blagojevich to toughen payday loan practices.

The regulations would protect consumers from exorbitant fees and unlawful collection practices by lenders trying to circumvent the Payday Loan Reform Act.

State Sen. Maggie Crotty (a Democrat from Oak Forest) and State Rep. David Miller (a Democrat from Dolton) are members of the Joint Committee on Administrative Rules, which will meet Tuesday and vote on the rules that have been subject to a 45-day comment period.

A super majority of votes, or eight members of the 12-member, bipartisan committee, composed of equal numbers of senators and representatives, is needed to stop the rules from taking effect. Miller is looking for fairness and a sense of standardization within the payday industry, in order to rid Illinois of the bad seeds. Crotty agreed.

"When people (issue) loans, they can see how much that person is making. They are lending money to people who cannot make those kinds of payments," Crotty said.

• The Payday Loan Reform Act was drafted to apply to loans that are made for 120 days or less. Most payday advances are made for 15 days or less.
• Miller was the chief sponsor of the Payday Loan Reform Act, which took effect last year. After its passage, average fees decreased 68 percent.
• Before the passage of the act, $320 payday loans would cost approximately $144 in fees.
• The same loan now only costs $47, according to data from the Woodstock Institute, a Chicago-based non-profit organization promoting reinvestment and economic development in lower-income and minority communities.

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Illinois Governor, Rod Blagojevich, is serious about ridding his state of payday loans. However, after passing new consumer protections on the cash advances throughout the state, he witessed an unfortunate consequence:

• The number of payday loans went down, but the number of low-dollar "installment" loans charging high interest went up.

Now, the governor is fighting back. Blagojevich is using his rule-making power to extend the aforementioned protections to high-interest installment lending. An editorial in The Southern Illinoisan says this is "a good idea." But refers to Blagojevich's quote about payday loan lending as "legal form of loan-sharking" as a bit over-the-top.

A time and place for payday loans: There are some sharks out there, for sure, but payday advances fill a real need for consumers who live paycheck-to-paycheck. What if a car breaks down? It will cost $100 to fix and payday is a week away. The bank won't make a loan that small, and you don't qualify for a credit card. But the payday loan lender will lend you $100 for $115.50, payable in 13 days.

The problem comes when borrowers make a habit of rolling over payday loans at higher and higher interest. With that in mind, the Illinois legislature passed limits on fees - the size of loans and the number of roll-overs allowed. Borrowers who can't pay up when they hit the rollover limit can pay off the loan over time without additional interest. And lenders can't threaten debtors with jail.

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Thursday, the Blagojevich administration and Attorney General Lisa Madigan took action against a payday loan company that they allege is in violation of numerous consumer protection laws.

In a statement, AmeriCash Loans LLC, of Des Plaines, Ill., said that a computer error caused it to make a mistake, and apologized for the error.

According to the Chicago Sun-Times, the Illinois Department of Financial and Professional Regulation issued an order to fine AmeriCash $190,000 for charging higher interest than state law permits on payday loans.

Consumer advocates accuse payday lenders of preying on the working poor with their short-term, high-interest loans, but lenders say they are providing a necessary service and meeting a market demand.

Examiners for the department found that AmeriCash allegedly issued 19 loans with interest rates of 521 percent, or 28 percent higher than allowed by the state's payday lending law.

"We have copies of legal documents that violate the law," said Susan Hofer, of the Illinois Department of Financial and Professional Regulation.

The law limits the number of times a loan can be rolled over and gives customers an interest-free payback option.

"Too many people who apply for short-term financial help find themselves in a devastating spiral of debt," Gov. Rod Blagojevich said in a statement.

AmeriCash, which has 10 days to request an administrative hearing to contest the order, says it has rectified the problem, and didn't access consumer bank accounts. Nor did it collect any money based on wage assignments, according to the no fax cash advance firm's General Counsel, Bonnie Schoenberg.

AmeriCash said it was testing a new product intended to be "a purely unsecured loan that would not include wage assignments."

According to the company's statement, as soon as it was discovered that our systems were automatically, incorrectly including wage assignments, they pulled the product immediately and began contacting payday cash loan customers to notify them of this error.

Just months after Illinois cracked down on the payday loan industry, Gov. Rod Blagojevich (pictured) is making another push for consumer protections — one the industry says is too extreme.

Blagojevich, who has termed the industry a "legal form of loansharking," is trying to use his executive powers to act against the businesses instead of working through the General Assembly. Short-term lenders allege that this is an abuse of his authority.

"I think they just need to take a civics lesson over there," Steve Brubaker of the Illinois Small Loan Association said.

Restrictions that took effect in December apply to loans of up to 120 days and are meant to keep borrowers from getting in over their heads. Both the administration and community groups claim the cash advance providers are getting around those restrictions by promoting loans that last 121 days or longer.

To counter this, the Democratic governor is proposing new regulations for the industry, rather than a change in the law. That means that he doesn't need the support of the full Legislature, and the only legislative review will be from the Joint Committee on Administrative Rules.

"JCAR has been a committee that has had a tradition of being friendly to that industry, so we expect this will be a tough battle," Blagojevich said. "But we're going to do everything we can to try to get it done."

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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.

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As the Illinois legislature debates the issuse of payday loans, an ordinance to extend the moratorim on issuing cash advances was approved last week by City Council members.

There are approximately 10 Calmuet City companies in the area offering these fast cash loans - they'll now have to wait another six months before they can conduct their business. Third Ward Alderman Thaddeus Jones said the moratorium was extended because the city would like to see a wide variety of businesses open in the city and not just certain kinds that may target specific areas.

State Rep. David Miller, D-Calumet City, said Gov. Rod Blagojevich signed a bill in June 2005 regulating payday loan companies. The bill, sponsored by Miller, aims to protect customers from the payday loan industry.

Prior to the reform act, these lenders could charge up to 1,000 percent interest on loans. There is now an established payday advance limit based on income and outstanding debt. Borrowers will be limited to loans of $1,000, or 25 percent of their gross monthly income.

Miller said the bill dealt with regulations within the cash loan industry - but said local municipalities should have the right to determine what kind of businesses are opening in their cities. He said while there is a place for payday loan businesses, smart growth involves having a mixture of businesses in a community.

The legislation also limits time repayment to 45 days and interest to 15 percent per $100 borrowed. Jim Gigliotti, Calumet City community economic development coordinator, said residents should be leery of payday loan businesses.

"They are loan sharks," Gigliotti said, adding that no faxing payday loans hurt the people who are seeking help. "These people are being charged exorbitant amounts of income … by the time they get their paychecks, there is nothing left."