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Shared on LinkedInMore 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!
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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