IDFPR Fines Payday Lender $27,500/Day for Failure to Track Loans

CHICAGO – The Illinois Department of Financial and Professional Regulation (IDFPR), Division of Financial Institutions, filed an order today against Illinois Title, Inc, after its examiners found that no loans from the firm had been entered into the statewide database.  On further investigation, the Division found that the company had not complied with the database requirement at any of its 55 Illinois licensed facilities.   A $500 per store/per day fine has been imposed. The fines will continue until Illinois Title, Inc. is in compliance with the Payday Lending Reform Act (PLRA).

The database requirement is one of the hallmarks of the Payday Loan Reform Act (PLRA) because it protects Illinois borrowers from becoming overwhelmed with multiple loans and prevents lenders from forcing borrowers to ‘roll-over’ their loans indefinitely.  On February 1, every payday lender in Illinois became responsible for entering all data about its payday loans into a statewide database.  Although the PLRA took effect on December 6, lenders were given a transition period of just less than two months to train their employees on the use of the mandatory database. 

“Governor Blagojevich made it very clear that we would aggressively enforce the consumer protections included in the PLRA.  Illinois Title, Inc. will have to change its business practices and we hope this action sends a clear message to other Illinois lenders that they must comply with the law,” said IDFPR Acting Secretary Dean Martinez.

Currently, there are 995 payday or other short-term lenders in Illinois, a 23% increase from last year.  According to industry figures, the average annual percentage rate for short-term loans is 595%, and the average amount of a short-term loan is $380. According to IDFPR, last year lenders made 1.4 million payday loans, which generated $1.3 billion in receivables.  

Payday loans are short-term loans secured against a post-dated check that consumers borrow at very high interest rates. Payday loans become a problem when consumers cannot repay after borrowing a substantial amount against their paychecks. Instead, consumers renew the loan and pay additional fees. Before the PLRA was enacted many consumers would have to take out additional loans to pay the fees on their original payday loan. This extends the cycle of debt further, with no resources for recovery periods or optional repayment plans.