Debate continues in Illinois over interest rates on pawnbroker loans
(The Center Square) – Legislation that would cap interest rates on pawnbroker loans in Illinois could be taken up by lawmakers in the coming days as the legislature returns Wednesday.
The Predatory Loan Prevention Act that passed in 2021 instituted a 36% APR interest rate cap on loans, but some pawnbrokers still charge over 200% for loans. The state’s 36% interest rate cap was part of the Illinois Legislative Black Caucus’ “Economic Access Pillar,” a move the caucus said will help narrow the racial and ethnic wealth gap.
A judge in Sangamon County Circuit Court granted pawnbrokers an injunction in September 2021 allowing them to continue charging higher interest rates.
Kelly Swisher, president of the Illinois Pawnbrokers Association, told The Center Square the measure will hurt those in need of short-term money.
“If you regulate us out of business, you are leaving a segment of the population with nowhere to go,” Swisher said.
State Sen. Jacqueline Collins, D-Chicago, chair of the Senate Financial Institutions Committee, said that is a fallacy.
“Pawnbrokers want you to think they are different from the payday lenders, but pawnbrokers like payday lenders make a living draining money from people who are struggling,” Collins said.
Senate Bill 4241 could come up in the Senate when lawmakers return Wednesday. It would need to pass there and then be taken up by the House before the end of the 102nd General Assembly Jan. 10.
Support for the interest rate cap is gaining momentum. A wide swath of organizations and individuals support the legislation, including the Catholic Conference of Illinois, the United Way of Illinois, the NAACP, and the Illinois Hispanic Chamber of Commerce.
The Woodstock Institute notes that nationally, annual interest rates on pawn loans are as low as 12%, a third of what is being proposed in Illinois.
“Regardless of the time of year, trying to make a profit off of someone else’s hardship goes against central tenets of the Jewish faith,” said Leah Greenblum, founder of Jewish Free Loan Chicago, which provides zero interest loans to those in need.
