The recent op-ed by Horacio Mendez “Stop pawnbrokers from charging predatory interest rates of 240%,” irresponsibly mischaracterizes my academic research — which is under rigorous peer review — and creates a false narrative that ignores the negative impacts of the Predatory Loan Prevention Act (PLPA) on consumers with subprime credit.
When Gov. J.B. Pritzker signed the PLPA in March 2021, he and other supporters claimed it would help “low-income communities.” But what really happened? If by “helping,” Pritzker and others meant eliminating choices, they succeeded. Our research shows that the PLPA made unsecured installment loans less available to subprime borrowers.
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The PLPA capped interest rates for any consumer lending product under $40,000 at an annualized percentage rate of 36%. This cap significantly decreased the availability of small-dollar installment credit in Illinois and worsened the self-reported financial well-being of many consumers.
In the six months following the imposition of the rate cap, the overall number of unsecured installment loans made to borrowers with “subprime” credit scores dropped a staggering 44%. Many lenders have ceased operations in Illinois. Nearly 40% of the respondents to a survey indicated that their financial well-being has declined since their previous lender stopped offering loans. Only 11% of respondents said their overall financial well-being has improved.
While the intention of Illinois’ lending rate cap was to protect consumers from so-called “predatory” lending, the PLPA actually harmed the very people its supporters intended to protect. Where will these subprime borrowers now go for credit to help them deal with unexpected expenses, like car or home repairs?
Mendez, and others engaged in the legislative process for small-dollar credit, must recognize that this market is diverse because consumers have diverse needs. For example, some small-dollar credit products are not actually loans, despite their name. The terms of a loan include an obligation to pay it back. Pawn transactions, widely known as pawn loans, do not have this obligation. So why would lawmakers include them in loan legislation?
Thomas Miller, Jr., professor, Mississippi State University; adjunct fellow, American Consumer Institute; senior research fellow, Consumers’ Research
Parents outraged by art are immature
For all the parents in Florida who are aghast at their youngsters gazing at the genitals on Michelangelo’s David, what do you suppose Junior sees every time he goes to the bathroom? Or what Missy glimpses when Mommy changes her little brother’s diaper?
I suggest it’s time for these adults to grow up — at least to the level of their offspring.
Bob Ory, Elgin
March to demand gun laws
Another three children killed and Congress does nothing. The only thing our government understands is head count, or should I say, body count? All these advocate groups in favor of banning assault weapons need to band together. It’s time to march on Washington — not 100 people but tens of thousands. And we stay there until they send a bill to the president.
Ray Szala, Calumet City
