Alert February 05, 2013

Illinois Financial Regulatory Agency Implements Restrictions on Payday Loans for Servicemembers

The Illinois Department of Financial and Professional Regulation adopted final regulations under the Payday Loan Reform Act, which provide protections to servicemembers and their dependents. The regulatory restrictions are substantially taken from section 670 of the John Warner National Defense Authorization Act, 10 U.S.C. § 987, and include: a 36% annual percentage rate cap, mandatory written and oral disclosures, and a number of prohibitions on rolling over, renewing, repaying, refinancing or consolidating a loan with the same lender with the proceeds of another loan; requiring arbitration; using a check, financial account or car title as security for an obligation; requiring payment through allotments; prepayment penalties; and restrictions on provisions prohibiting prepayment. The final regulations are effective February 19, 2013.