More and more Illinois consumers are turning to auto title loans in an attempt to make ends meet, and getting trapped in a long-term cycle of debt. These loans often have staggering triple-digit interest rates and long loan terms – requiring expensive monthly payments for as long as two years. If people fall behind on their payments, the lenders can take their car, causing ripple effects on their employment stability, health care access, and other parts of their lives.

Today, we released a new report with Woodstock Institute examining title lending in Illinois, and sharing the stories of three households that took out title loans. Called No Right Turn: Illinois’ Auto Title Loan Industry and its Impact on Consumers, we find that:

• The vast majority of title loans in Illinois are taken out by low-income people. Nearly three quarters of all title loan borrowers in Illinois have incomes of less than $30,000, and over 90 percent have incomes of less than $50,000.
• The number of title loans issues in Illinois has steadily increased between 2009 and 2013. In 2009, Illinois consumers borrowed an estimated 73,116 title loans. By 2013, that number had increased to 100,698 title loans.
• The annual percentage rate (APR) charged by lenders has decreased slightly, but the average term, principal amount, and total fees have increased significantly. While the average APR decreased from 285 percent to 234 percent, title loans in Illinois now have an average term of 18.6 months with principal amounts of $1,089 and average fees of over $3,000.
• Illinois title lenders made loans to consumers in other states where title loans are illegal.

Woodstock Institute and IABG recommend that:

• The Consumer Financial Protection Bureau (CFPB) issue strong rules covering high-cost, small-dollar loans, including title loans, to ensure loans are safe and affordable.
• Congress pass legislation instituting a 36 percent cap for all consumer loan products, including title loans.
• The Illinois legislature strengthen the Consumer Installment Loan Act to require stronger ability-to-repay standards, maximum loan terms, and a rate cap of 36 percent APR.
• The Illinois Department of Financial and Professional Regulation (IDFPR) publicly release loan-level data from the state database to allow for a more detailed analysis and monitoring of small-dollar lending in Illinois.
• Financial Institutions create and market affordable, small-dollar loans with ability-to-repay standards as alternatives to high-cost, predatory products.

Find out More:

We will be hosting a webinar on Tuesday, November 3 to share more about the report. Register to save your spot!

Download the full report.

Spread the Word!

You can use these sample tweets to share the new report:

Title loans in IL increased by 37.7% from 2009-2013 via new report: http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst

New data: 90% of IL title loan borrowers had incomes of <$50,000. http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst

How much in fees does the avg IL borrower pay on $1000 title loan? Find out here:http://bit.ly/autotitleIL @ILAssetBuilding @WoodstockInst

$25.5 million/month: Avg paid in fees to IL title lenders in 2013. http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst

Last summer, Amber and Jason bought a new home for their family in Rantoul, Illinois. During their first weekend in their new home, the water main broke. Though they had paychecks coming in, they didn’t have enough money to cover the cost of the repairs.

Needing to keep the water on for their family, they sought out an auto title lender, who told them, “You can take out a loan right now, no problem.” They took out a loan for $500, and started making monthly payments of about $86. Looking back, Jason states, “I was under the impression when we started that as we paid that $86 per month, it would come off the $500 that we got.”

When Jason checked on the principal balance after paying for a couple of months, however, he found the balance was $498 – only $2 had gone toward the principal and the APR on the loan was 200 percent. Living paycheck to paycheck and trying to pay off the loan, Jason and Amber actively worked with the lender to change the payment plan, change the payment date, and make adjustments to the loan. But, as Jason shares,

“I couldn’t move the payment date. I couldn’t pay it early. There’s no lee-way. There’s nothing. It’s either that or they take the only vehicle I’ve got.”

The $86 a month inflexible payment affected their family in horrible ways – forcing them to choose between their vehicle and their health, or to delay paying other bills. Jason sacrificed an important post-operative appointment to make the loan payment one month.

One loan payment occurred the day before Amber gave birth to twins. With all the extra money going towards the loan, Jason was left with no money for gas and was unable to visit Amber and his newborns in the hospital.

After 13 months of making $86 payments – a total of about $1,118 – Salt and Light Ministry helped Amber and Jason find the money to pay off the loan entirely. When they went to pay off the loan, they owed $559, of which $463 went to the principal. After making more than $1,000 in payments, they had only made $37 of progress on the principal. Had they continued with their two-year payment plan, they would have paid a total of $2050.80, more than four times the amount of the loan.

Learn More

This story is part of No Right Turn: Illinois’ Auto Title Loan Industry and its Impact on Consumers, a report we released with Woodstock Institute last week. Download the report to learn more about auto title lending in Illinois, and how it affects people like Jason and Amber.

To hear more, check out the recording of a webinar we hosted discussing the findings in the report.

You can use these tweets to spread the word:

IL title loans can accumulate $15 in interest per day. Stories in report: http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst

Title loans force ppl to make choices btwn their vehicle & health. http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst

Jason & Amber paid $1677 on $500 title loan. http://bit.ly/autotitleIL #StoptheDebtTrap @ILAssetBuilding @WoodstockInst

Mark has lived and worked in Chicago his entire life. For more than 42 years, he supported his family by working for the U.S. Postal Service. Since retiring, he spends time with his four children and 11 grandchildren and serves as an Ordained Senior Elder at his church.

Now that Mark is retired, he lives on a fixed income. A couple of years ago, Mark had a financial emergency. Rather than miss a rent payment for the first time in his life, he turned to an auto title loan to try to make ends meet. His $1,000 loan had an annual interest rate of 304.17 percent. Given the high interest rate, Mark worked to pay off the loan as quickly as possible.

Wanting to avoid relying on such a costly loan in the future, Mark began working hard to build up his savings. Unfortunately, before he could meet his savings goal, his car broke down. To stay afloat, he took out a second auto title loan for $1,500. When he finishes paying off this loan, he will have paid $381.90 per month for 24 months – an astounding total of $9,165.60 – on an original loan of just $1500.

Mark’s total price tag for taking out $2,500 in title loans to cover common financial emergencies will exceed $15,000. Instead of making ends meet, Mark is caught in a cycle of debt.

Learn More

This story is part of No Right Turn: Illinois’ Auto Title Loan Industry and its Impact on Consumers, a report we released with Woodstock Institute recently. Download the report to learn more about auto title lending in Illinois, and how it affects people like Mark.

You can use these tweets to spread the word:

$2500 in title loans can cost more than $15000. http://bit.ly/autotitleIL #StoptheDebtTrap @ILAssetBuilding @WoodstockInst

Mark’s Story: 2 auto title loans, 304% APR, 2 year loan terms via new report:http://bit.ly/autotitleIL @ILAssetBuilding @WoodstockInst

Paul lives with his two teenage daughters in the small town of Fairmount, Illinois. He has worked hard in the manufacturing industry for most of his life and is currently working for a small company that builds farm equipment. Paul never thought that he would take out an auto title loan, but his life took a turn for the worse this year.

In December of 2014, his wife of more than 20 years died of a heart attack after a year-long struggle with lung cancer. His life was shaken up.

The $8,000 in funeral costs and medical expenses put Paul into debt and strained his credit, but he kept working hard to stay afloat. After months of financial stress, Paul had a heart attack of his own in March 2015, which forced him to be out of work for four weeks.

He was struggling to get by and support his daughters. By April, Paul felt like he had run out of options, and so he took out a $2,000 title loan to try to make ends meet and started making the monthly payments of $450.

Then in June, Paul was injured in an industrial accident that caused him to lose part of his fingers. When he received the settlement from the accident, he wanted to completely pay off his title loan. He called the loan company, and they explained that he was accumulating about $15 in interest per day. To pay it off in September, Paul paid $2,400. In total, he paid about $4,200 for the $2,000 loan – a much lower amount than he would have paid if he had not paid off the loan early.

Paul was aware of the dangers of these types of loans. He knows other people who took out title loans and had their cars repossessed when they defaulted. He stated, “I always swore I would never take out a title loan, but I was in a bind.” High-cost title loans take advantage of consumers’ vulnerability and tendency to have “tunnel vision” in times of financial stress. Fortunately, Paul is starting fresh. He works with the Money Mentors program at the University of Illinois Extension, he has a budget, and he’s debt-free and determined to keep himself that way.

Learn More

This story is part of No Right Turn: Illinois’ Auto Title Loan Industry and its Impact on Consumers, a report we released with Woodstock Institute this week. Download the report to learn more about auto title lending in Illinois, and how it affects people like Paul.

You can use these tweets to spread the word:

Stories of title loans stripping wealth from IL families in report: http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst

Read stories of ppl trapped in cycles of debt by auto title loans: http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst

Last week, the IABG team was in St. Louis participating in a conference about the 529 program and Children’s Savings Accounts. The conference was hosted by the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, and the Center for Social Development at Washington University.

There was great energy, great ideas, and great partners in the room. Here are 3 things I learned.

1. Tangible Hope. William Elliott, Director of the Center on Assets, Education, and Inclusion described how assets, and particularly Children’s Savings Accounts, can give children and families “tangible hope.” This hope can change people’s behaviors and lead to brighter futures.
2. $1.4 Million in San Francisco CSAs. In the Kindergarten to College (K2C) program, they have opened 23,000 Children’s Savings Accounts, and families have saved a total of $1.4 million so far.
3. Nearly 99,000 CSAs in Nevada – and a Tortoise. The Nevada College Kickstart programhas opened nearly 99,000 accounts for children across the state. Their universal, automatic program opens a CSA for every kindergartner, and provides an initial $50 deposit. What’s more – Nevada has an enthusiastic college savings mascot. Meet Sage the Tortoise!

Finally, our favorite quote from the conference:

“Children’s Savings Accounts are needed to provide a trajectory for economic mobility.”

-Kilolo Kijakazi, Urban Institute

Want to learn more about our efforts to create a universal CSA program in Illinois? Visit our new CSA website and spread the word using #brighterfuturesil!

You can find us @ILAssetBuilding and on Facebook.