Cap on ‘payday lender’ rates hurt borrowers with bad credit

Thousands of consumers with subprime credit or no credit no longer have access to any form of regulated, reliable loans.

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Illinois’ rate cap on consumer lending drove businesses out of the state and left consumers without borrowing options, a financial services executive writes.

Illinois’ rate cap on consumer lending drove businesses out of the state and left consumers without borrowing options, a financial services executive writes.

Pat Nabong/Sun-Times

Regarding Rep. Will Guzzardi’s letter to the editor on payday lenders, it’s one thing to announce a success, it’s another to have data to confirm it.

Guzzardi is right that it’s expensive to be poor in America. In Illinois, it’s even harder, as tens of thousands of consumers with subprime credit or no credit no longer have access to any form of regulated, reliable loans.

Guzzardi claims 46 new companies now make installment loans at rates at or below 36%, and that some lenders offer interest rates as low as 6%, depending on a borrower’s credit.

What he fails to acknowledge is that the new law has resulted in 28% to 36% of Illinois — more than a third of the adult population — unable to qualify for that 6%. In fact, they cannot qualify for any small dollar loan at any interest rate.

While it’s impressive to see a nearly 70% increase in loan applications from consumers with a non-profit creditor, such data is incomplete without seeing how many of those new loan applications were declined because consumers do not have the credit standing to qualify.

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The American Financial Services Association comprises traditional installment lenders that are regulated by both Illinois and federal agencies, and offer safe, ethical and transparent loans with fixed terms and no balloon payments, hidden fees or penalties for early repayment. Unlike payday lenders, our member companies provide subprime or no-credit customers the opportunity to improve their credit ratings, as our member companies report to credit agencies.

AFSA has stated that there is no room in the consumer finance industry for predatory lending practices. We also believe that every American consumer deserves access to some form of credit, particularly in times of need. Unfortunately, the Illinois rate cap law, by driving responsible lenders out of state, has cut off access to credit and worsened economic inequality for people who aren’t privileged enough to have more credit options.

Danielle Fagre Arlowe, senior vice president, AFSA

ShotSpotter still a bad idea

One Sunday afternoon, we were called to a hospital trauma bay three times to attend to another gunshot wound victim. Rampant gun violence epidemic has led cities to pursue different solutions, such as ShotSpotter, a sound detection system that alerts local law enforcement to the location of a supposed gunshot. However, it is not an effective solution.

Following the 2021 killing of 13-year-old Adam Toledo, who was shot by a policeman deployed via a ShotSpotter notification, ShotSpotter released a statement saying its technology “is a vital tool for law enforcement.” In reality, ShotSpotter squanders police resources. The MacArthur Justice Center found that “89% of ShotSpotter deployments in Chicago turned up no gun-related crime.” Yet Chicago has extended a multimillion-dollar contract with ShotSpotter through 2023.

ShotSpotter also encourages over-policing in communities of color. A report from Chicago’s Office of the Inspector General found that ShotSpotter “rarely produce[s] documented evidence of a gun-related crime” and has led to officers engaging in more “stops and pat-downs” in Black and brown communities. The report declared that implementing ShotSpotter changed how police interact with citizens near ShotSpotter alerts, and these effects may influence ShotSpotter’s algorithm because the algorithm relies upon information from police officers’ reports.

Any emergency room physician or trauma surgeon on the South Side can attest that Chicago has a gun violence crisis. But ShotSpotter technology is inherently reactionary, only alerting after a gun has supposedly been shot. The solution does not simply lie in short-sighted and racialized policing.

Public health policy should drive the city’s response to gun violence.

Meredith Hollender, first-year medical student
V. Ram Krishnamoorthi, MD

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