Is Your Short-Term Lender Consumer-Friendly Or Predatory

Metropolitan Family Services wants consumers to know they have rights. The Illinois Payday Loan Reform Act of 2005 established consumer protections for short-term loans of 120 days or less, with APRs above 36 percent. But not all lenders adhere to the provisions of the Act or have found loopholes to skirt the restrictions. Here are some tips to tell if a loan is consumer friendly and has protections:

1. The loan should not exceed 25 percent of your gross monthly income. This percentage best reflects how much you can afford to repay. If offered more, beware.

2. You should not qualify for more than two short-term loans at one time. Unscrupulous lenders place no limits on the number of loans you can take out, keeping you indebted to them.

3. You should not pay more than $15.50 in finance charges for every $100 borrowed. If you're paying more, report it to the Attorney General's office.

4. If you are in debt more than 45 days, your lender should offer an interest-free repayment plan. If your only option is to roll the loan over -- and an unlimited number of rollovers is allowed -- that is a predatory practice which could trap you in a cycle of debt.

5. A legitimate lender subscribes to a reporting service that enforces provisions of the Payday Loan Reform Act. Ask if your lender does.

Metropolitan Family Services supports SB 1993, which seeks to extend the Payday Loan Reform Act protection to ALL small, short-term consumer loans. We believe Chicago area families should know how to avoid predatory lending products that may bring them financial ruin, destroying their hope for a secure future. -- Metropolitan Family Services