Illinois Regulator Issues Faqs On Predatory Loan Prevention Act And Notice On Database Reporting

Ballard Spahr LLP

Ballard Spahr LLP

The Illinois Department of Financial and Professional Regulation (DFPR) has issued Predatory Loan Prevention Act Frequently Asked Questions (PLPA).  The PLPA became effective on March 23, 2021, the day it was signed into law by Governor Pritzker.  The DFPR also issued a “Notice Regarding the Consumer Reporting Database and the Predatory Loan Prevention Act” (Notice).

The PLPA extended the 36% “all-in” Military Annual Percentage Rate finance charge cap of the federal Military Lending Act  to “any person or entity that offers or makes a loan to a consumer in Illinois” unless made by a statutorily exempt entity.  (The bill containing the PLPA also amended the Illinois Consumer Installment Loan Act (CILA) and the Payday Loan Reform Act (PLRA) to apply this same 36% MAPR cap.)

FAQs.   The FAQs expressly state that the PLPA does not impact contracts lawfully entered into before March 23, 2021.  Such contracts continue to be effective and the lender can continue to service it.  In addition to confirming the PLPA’s March 23 effective date, the FAQs address the following topics:

  • Rate cap and APR calculations
  • Fees
  • Payday and title-secured loans after the PLPA
  • State database reporting
  • PLRA and CILA licensure
  • Surrender of license
  • Examination

Notice.  Prior to enactment of the PLPA, only lenders making certain higher-cost loans with annualized rates above 36% were required to report loan information to a state database administered by Veritec.  The PLPA now requires all licensed lenders, regardless of the rate charged, to pay Veritec fees for each loan and report information about the loan to the database.  Because the PLPA became effective immediately and Veritec onboarding typically takes several months, Illinois lenders initially faced the Catch-22 of either violating the amended law or ceasing all lending operations.  To address this dilemma, the Notice provides that the DFPR “does not intend to take adverse supervisory or enforcement action for violations of reporting requirements” under applicable Illinois law until further notice.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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