CHICAGO (Legal Newsline) — Illinois Attorney Kwame Raoul has joined a 13-state coalition urging the federal government to ensure small loan borrowers are protected from high interest and abusive lending and that lenders comply with state laws regarding small-dollar loans.
The coalition sent a letter to the Federal Deposit Insurance Corporation (FDIC) in response to the corporation's request for input on how it can help meet the demand for "small-dollar-amount lending," according to the Attorney General's Office.
The coalition is urging the FDIC to ensure these types of loans meet state laws and protect against "predatory, high interest loans" that "trap" those with low incomes into "endless cycles of debt" due to loan fees and commonly referred to as "rent-a-bank," Raoul's office said.
“The FDIC must guard against predatory and abusive practices,” Raoul said in a statement. “Any FDIC guidance should encourage an ability to repay assessment. Evasion and rent-a-bank schemes should not be condoned.”
According to the Attorney General's Office, the average income for payday loan borrowers is $30,000 per year, with borrowers staying in debt for six months after borrowing to repay their first loan. These borrowers often spend more than $500 each year in fees just to keep borrowing around $300, Raoul's office said.