The Sun-Times article on payday loans and black communities highlighted a tension that neither lenders, consumer advocates nor lawmakers have found an optimal policy to break.
Business groups repeated a phrase that payday lenders have used for over 30 years: that they provide a service to underserved communities that no one else provides. What the consumer noted well: “It helped me when I needed it, but the interest rate is crazy.
In truth, the legislator must meet a twofold objective in credit policy: does it ensure that sufficient credit is both available and responsible? A rate cap is a brutal policy tool, and the ongoing debate around Illinois’ interest rate cap is whether it strikes the right balance.
Overall, is Illinois policy designed not only to drive out “bad credit” but also to attract “good credit”? The notes of bank deserts, underbanked households and the state’s underserved communities are making it clear that this is unlikely to happen by accident.
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The American Fintech Council was the only industry group to support Illinois’ rate cap bill. This fits with our non-traditional business model: many members of our banks partner with financial technology (“fintech”) companies to provide consumer loans with APRs well at or below 36%. Our partnerships largely lend to privileged and non-privileged borrowers and compete more with bank credit cards than payday lenders.
Because the costs around consumer loans are largely fixed, rate caps could mean that it is harder to provide lower-value loans to subprime, and harder-to-serve borrowers who cost the most to serve because they are in remote locations or have a higher risk. Bank-fintech partnerships use technology that can lower costs and can find ways to provide smaller loans at an affordable price.
However, it is critical that Illinois policymakers develop policies and encourage fintech partnerships and other innovations that may be outside the traditional banking model but have the potential to achieve their dual goals in lending. .
The challenge for state lawmakers is how to facilitate these low dollar lending alternatives and ensure that they are available and competitive with more expensive options that can bypass the Illinois rate cap. We look forward to working with state legislators to balance their dual policy goals and meet the credit needs of consumers, regardless of their risk profile or community.
Gerron S. Levi, Senior Vice President, Head of Government Affairs, American Fintech Council
Reconfiguration of the municipal council
So please tell me when did we start making new rules on the new neighborhood maps using skin color and not population like in the past?
This new way of thinking is very stupid. Aldermen and aldermen, please do your job and stop being so awake. We need the map.
Short and sweet, do your job.
Donald J. Lazo, Gage Park