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Egan Coalition celebrates Payday Loan reform; warns of The Grinch!

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Members of the Monsignor John Egan Campaign for Payday Loan Reform, including representatives from Citizen Action/Illinois, Project IRENE, Protestants for the Common Good, Sargent Shriver National Center on Poverty Law, and Woodstock Institute, and Secretary Brent Adams of the Illinois Department of Financial and Professional Regulation gathered outside a downtown payday loan store on Monday, December 13 with a real-life payday Grinch to sing carols warning holiday shoppers of the dangers of costly payday installment loans.

“Between a weak economy and the pressures of holiday shopping, the temptation to take out a payday loan can be particularly high,” said Dory Rand, president of Woodstock Institute. “But a loan of a couple hundred dollars can carry triple digit interest rates. Taking out a payday loan can result in serious financial and even legal trouble.”

Beginning in March 2011, legislation signed by Governor Quinn will close a long-standing loophole that allowed 700 percent payday installment loans to trap borrowers in a costly cycle of debt. Thanks to the new consumer protections, sponsored by Sen. Kimberly Lightford (D-4) and Rep. Lou Lang (D-16), all payday loans in Illinois will be subject to a comprehensive interest rate cap and other important consumer protections, such as a limit on the amount of time a borrower can be in debt, a prohibition on unaffordable balloon payments, and ability to repay requirements.

However, payday loans are still a costly form of debt that targets those consumers who can least afford extra charges and these new protections will not be in place during the coming holiday season. The Monsignor John Egan Campaign recommends that consumers seek out other options when possible.

“The new payday protections continue the legacy of Monsignor John Egan, who started to fight against usurious loan terms after seeing one of his parishioners fall into a debt trap in 1999,” said Laura Dean Friedrich, Director of Education and Advocacy for Protestants for the Common Good. “We must remain vigilant to ensure that all consumers are protected from abusive, high-cost loans.”

Photos from the event can be seen here, via The Woodstock Institute.