State Payday Advance Group Says Consumer Groups Duped by Out-of-State Lenders in Power Grab

SPRINGFIELD, IL – Legislation introduced on Tuesday (HB1100) is not backed by the largest Illinois state payday and title loan association because of its ultimate anti-consumer bent. The Illinois Small Loan Association (ISLA) represents 81 percent of the industry in Illinois (820 locations), and says that the proposed legislation is nothing more than an intra-industry fight over market share.

“This legislation, put forward by the Consumer Financial Services Association (CFSA), will kill the local lender and ultimately cost consumers more,” said Bob Wolfberg, president of ISLA. “We are advocates of responsible legislation that protects both our industry and our customers, and this legislation does neither.”

According to an article that appeared in the February 7 Springfield State Journal-Register, the CFSA is supporting a bill that their spokesperson said, ” … would give Illinois the most restrictive regulatory scheme of any state … ” And, as reported by the Indianapolis Star in 2001, the CFSA passed a similar bill in Indiana that contributed to the closing of 70% of that state’s payday lenders.

“Why would the CFSA support a bill in Illinois that is more restrictive than the one next door in Indiana that closed 70% of the loan businesses?” questioned Wolfberg. “It is because their stores will not be forced to close.”

The CFSA makes up the other 19 percent of the stores in the payday lending market in Illinois (191 locations). In at least a dozen states CFSA members evade state law by partnering with out of state banks to import interest rates higher than permitted by state law. In many of those states, CFSA members engineered the state law that they later evaded by importing the high interest rates. (Note: Interest rate importation is allowed by the federal government, and is most commonly used by credit card companies to bypass state consumer protection laws.)

“The CFSA has time and time again helped to craft state legislation and then makes an empty promise to comply with that legislation,” said Wolfberg. “The CFSA, controlled by companies out of South Carolina and Tennessee, is using the Egan Campaign for Payday Loan Reform to promote their power grab for the Illinois payday loan market.”

The states where CFSA members have avoided the legislation they have helped to craft include Alabama, Arizona, Arkansas, California, Florida, and Ohio. States where CFSA members operate outside existing state law are Georgia, Michigan, Nebraska, North Carolina, Pennsylvania, and Texas.

ISLA is an Illinois trade organization that represents hundreds of short- term payday lenders and their four thousand employees in Illinois. The association offers consumers short-term loans that are the most affordable and most convenient available. ISLA seeks to rigorously police its membership for compliance with the association’s best practices, to be fair and honest with all consumers.