Earlier this week City of Chicago Mayor Rahm Emmanuel announced two new initiatives aimed at protecting city residents from dangerous financial products and practices. The first was a new partnership with the Consumer Financial Protection Bureau (CFPB). The CFPB and the City will share information, data, and analysis that will support efforts to identify and stop financial scams and frauds in the Chicago area.
The second is a city ordinance, to be introduced at the December 12th City Council meeting, which aims to reduce the concentration of predatory lending, enforce regulations on illegal debt collection practices, and empower the city’s Department of Business Affairs and Consumer Protections.
The exact details of the ordinance have yet to be released, but Wednesday’s press release by the Mayor’s Office included:
- New zoning regulations to potentially limit additional payday lending locations
- Regulate and license debt collectors to ensure they stop illegal collections practices
- Empower the Department of Business Affairs and Consumer Protections to take action against businesses violating consumer protection laws
These initiatives have the potential to greatly impact the financial security of Chicago residents, especially those in low- to moderate-income communities most effected by predatory financial products. Payday lenders and auto-title loan stores offer financial products with extremely high fees and interest rates that often result with borrowers trapped in a destructive cycle of debt. We hope these efforts will reduce their presence in areas where they are heavily concentrated.
While these reforms will almost invariably be a step in the right direction to eliminating predatory lending, abusive collection processes, and business practices that threaten to destabilize the economic security of individuals and communities in Chicago, the rest of the state of Illinois will not benefit from these reforms. IABG is supporting the efforts of Illinois People’s Action to push for statewide reforms on predatory small dollar loans, including auto title loans. IABG is encouraging financial institutions to offer safe small dollar loan products through our Alternative Small Dollar Loan Toolkit. We also hope that other Illinois communities will work to partner with the CFPB to implement similar efforts.