Comments sent to State of Illinois RE: Short Term Loans

I sent an email this morning to the Illinois Department Of professional and financial Regulation who was seeking comment on proposed rules making regarding Short Term loans. These rules are in response to the PDL industry creating a new Product to circumvent the state regulation relating to Pay Day Loans.

Anyone who would like to offer their own comments can send an email to the Illinois Department of Financial and professional regulation at Rulecomments(at)idpfr.com.

[quote]Good Afternoon;

I would like to take to opportunity to comment on the Payday and short term loan industry in Illinois, and offer suggestions as to ways in which Illinois Consumers may be better protected.

Let me begin by stating that I have used payday and short term loans, luckily I have never really been “sucked into “ the cycle they can create. These loans can be a useful tool in finances so long as consumers are aware of the terms and condition surrounding the contracts which they are signing. Unfortunately all too often, consumers make the decision to take out a loan under stress, and often are only looking t getting the money they need to make ends met or meet other obligations. At times like these people don't stop to think about how they will meet this new obligation, often figuring they will cross that bridge when they come to it.

Historically, these loans are the beginning of a vicious cycle in which consumer can become trapped by extortionist interest rates, threats of lawsuits or criminal prosecution. As a result other obligations are allowed to languish while the immediate need to address these loans takes center stage. This can go so far as to cause families to have utilities shut off, not be able to buy groceries, and even loose their homes.

The State of Illinois took a giant stop forward in protecting consumers and families in Illinois with the passage of the Pay Day Loan Reform Act. Unfortunately, this was not enough. There are huge loop holes left in this bill. At one time the Terms “Pay Day Loan” and “short Term Loan” was essentially the same thing, and used interchangeably. With the passage of the PDLRA they terms were split, the newly created “Pay Day Loan” was the product which meet the definition and regulations of the PDLRA, while the “Short Term Loan” remains what had been the tradition ”payday loan”. Namely high (extortionist) interests rates which are not regulated and ability to renew loan up to four times. The “short Term Loans” should be placed under similar regulations as payday loans, (including registry in the state data base) as well as regulation of the maximum interest rate that can be charged, as well as fees and protection in case of default.

Another loop hole which was left open was the growing trend of Internet lenders. These internet lenders are often based in other states, or even other countries. They often make loans with interest rate up to 1000%. They do all paperwork by phone or over the internet, do not provide disclosure statement or often any documentation at all. Many refuse to allow consumer to pay down their loans, offering only the option of finance charges or paid in full. They automatically deduct their payment from consumers account s, and if a consumer's account is over drawn they will continue to try to debit it, causing numerous overdraft fees, and in some cases causing the consumers bank to force close their accounts. These internet lenders are so persistent and stubborn about not working with consumers that often the only recourse consumers have is to voluntarily close their accounts, and allow the loan to go into default. These lenders will continues to assess fees and interests, even after they know the accounts have been closed. Theses lenders hide behind the fact they are not located in the Consumers state or even in the US , and attempt to use this fact to avoid compliance with State and Federal laws because they do not have a physical location within the state, including Illinois..


I am a moderator for a website which deals with debt and finances. There has been much success recently when consumers do research to know and understand their states laws, and cite these laws to get lenders to accept what has been paid, or payment of the principle and to mark their loans as paid.

The following is an excerpt form an email one community member received from Rio Resources (one of the worst about hiding behind internet anonymity) received in regard to closing their account as paid

“RIO RESOURCES
FAX: 866-668-0535
Email: compliancedepartment@rioresourcesllc
May 17, 2006
RE: Your Complaint
Ms. Doe,

We have received your correspondence regarding your complaint with our company. It appears as though you have misunderstood the terms of your loan agreement.

While the information that you have collected may apply to companies that have locations in your state, it does not apply to Internet Lenders. We do not have a physical location (office) in your state, therefore the same restrictions do not apply to us. This is based on sound advice from our legal department.

We lent you money in good faith, with the understanding that you would abide by the terms detailed on your loan contract. We upheld our end of the agreement by crediting the funds to your account, and had good faith that you would uphold your end of the agreement in return.

While we believe that all terms and conditions of the loan agreement have been met on our end, it has always been our policy to make sure that the customer is happy and completely satisfied with our services. For this reason, we are refunding your full finance charge on your loans to you since you believe it to be unfair.

It has been a pleasure doing business with you. Your account will be marked Paid In Full and the Lender will be prepared to send you a refund check in the amount of $155.00. This includes any amount paid above the total of $500.00 that we lent to you. We expect this offer will bring us to an amicable resolution.

Please acknowledge your understanding and acceptance of our proposal if you are in agreement with the offer detailed above. Once your acknowledgement/agreement is received, we will expedite the issuance and mailing of your refund check to the mailing address listed above.

Thank you for your time and consideration in this matter.
Respectfully,
Compliance Department
CC/file”

AS you can clearly see, they feel because they are not physically located in a state, they are not bound by that states laws or regulations. Because the Illinois Laws is silent on the subject of internet lenders, they feel they are not governed by our law. This is a typical attitude of these lenders. Some disclosure statements even go so far as to specially restrict or strip the consumer of any right or remedies they may have under state law.

Illinois laws need to be amended to specifically include internet lenders and place them under the same regulation as store front lenders in the state.

Please feel free to contact me if you would like to further discuss these issues or any comment which I have made. Also, feel free to look at the community which I mentioned at www.debtcolsolidationcare.com. The bulk of the discussions about pay day loans tend to be in the “Dealing With Collections Agencies” and “debt consolidation and Settlement” areas.

Thank you for your time and attention

Respectfully;

Clay[/quote]