Payday Loan Reform Act in Illinois was been introduced in June 2005 to regulate cash advance. Due to a rise in the percentage of payday loan borrowers in the state of Illinois, a set of regulations was required to prevent exploitation of the borrowers.
It is a known fact that the rate of interest for payday loans is higher than bank loans. Also the payback period for the loan is limited. On top of that, the borrower is heavily penalized in case he fails to repay the loan on time. There have been instances when the borrowers have fallen into debt traps in order to repay the payday loan amount along with the interest rate and late fee. In order to control such situations, most of the states in US have their own regulations related to cash advances.
Department of Financial and Professional Regulation regulates cash advance in Illinois. The major points of this Reform Act are:
Lenders can charge a maximum interest up to $15.50 per $100
Borrower cannot borrow more that two payday loans at a time
Maximum amount to be borrowed is $1000, or 25% of the salary, whichever is less
Borrowers cannot have the loan for more that 45 days, after which they must take a 7 day loan free period
Borrower cannot be subjected to criminal prosecution in events of failure to repay payday loans
Borrower should be provided a 56 day payback period, and no penalty should be charged for late payment
Along with the above mentioned rules, the lender is expected to follow a database to view payday loan records of the borrowers.
Before these regulations were put in place, the cash advance used to be an unsystematic affair. The lender company used to charge an exorbitant rate of interest from the borrower. Middle class suffered the most as they were penalized heavily for late payment of the loan amount.
There were instances when the borrower had to
Many good has happened since the state realized that cash advance was exploiting people rather that offering financial aid. Since the state government in many states has awakened to protect the vulnerability of middle class, things have improved and payday lenders are no more exploiting the people. Cash advance follows proper rules and regulations now.
Cash Advance in Illinois used to follow no rules and regulation before 2005. However, after the state government introduced formal set of regulations, the situation improved and the exploitation was reduced. Visit Cash Advance Services to know more about these loans.
