MORRIS – Payday loan providers owned by the company Cottonwood Financial Illinois have violated state law more than 90 times since March, and the Morris Cash Store was one of them.
The Morris store racked up $7,000 in fines within three months for committing a handful of violations to the Consumer Installment Loan Act and Payday Loan Reform Act. These acts establish rules and regulations meant to protect borrowers from high interest rates that can create a cycle of debt.
The Cash Store, on Route 6, provides various cash loans for those who need to finance unexpected, emergency expenses.
The store was issued four separate violations: scheduling a monthly payment exceeding 50 percent of a borrower’s monthly income; failing to accurately determine if a borrower was eligible for a loan; issuing a payday loan exceeding 22.5 percent of a borrower’s monthly income; and failing to properly enter a loan into the database on the day it was made.
The infractions were issued by the Illinois Department of Financial and Professional Regulation and were listed in the department’s monthly disciplinary reports.
Managers of the Cash Store in Morris referred requests for comment to Cottonwood Financial Illinois headquarters, which did not return phone calls.
Sue Hofer, spokeswoman for IDFPR, said the department handles these violations on a case by case basis. Ultimately, they want to help a business correct its issues, not force owners to close the doors.
“Our goal is to get businesses into compliance, not shut them down,” Hofer said.
She said the flood of cash store violations comes after the CILA and PLRA were reinforced with tighter regulations.
The new rules are meant to further protect consumers from issues like unlimited loan rollovers, which involves taking out a new loan to cover expenses from a previous loan.
According to information from the Attorney General’s office, certain payday loans can legally reach an annual interest rate of 400 percent.
“What was happening is people would take out loans, then go back in and renegotiate to take out more money to pay back the first loan – and so all of the interest kept adding on and on and on,” Hofer said. “What we tried to do is rewrite [the acts], so there was a realistic opportunity for the loan to be repaid.”
But the laws don’t always protect consumers who are already trapped in a bad loan.
When places like the Cash Store and other payday loan services violate the law – issuing loans that are difficult to repay on time – the lender is fined, but the borrower “unfortunately has no recourse,” Hofer said.
Payday loan borrowers are eligible for an interest-free repayment program, upon request, but other cash installment loans are not eligible for the program, according to the Attorney General’s office.
Because of this, IDFPR encourages consumers to treat payday loans as an absolute last resort, after exhausting all other options.
Locally, nonprofits like We Care of Grundy County offer rent and food assistance to those with financial emergencies.
We Care Executive Director Denise Gaska said the organization has helped individuals who have become bogged down by payday loans, and typically encourage all of their clients to avoid the loans, even as a last resort.
“We always counsel people away from them, because they are really dangerous,” Gaska said.
However, in some instances, cash advance services can be useful for those with nowhere else to turn.
Gaska commended the Morris Cash Store for being the only place locally that will process electric and gas bills for clients in danger of having their utilities shut off.
“We recognize that emergencies happen,” Hofer said. “But before they take out a loan from a consumer installment store or payday lending store, they should try every other option.”
Tips for borrowing and dealing with debt
• Approach local churches, nonprofits and family members for financial aid before pursuing a payday loan
• Beware of installment loans and title loans which can have excessive hidden fees and high interest rates
• Research the lender through the Better Business Bureau and state disciplinary reports
• Know your rights as a borrower. Visit idfpr.com to learn more about what to ask and what to look for in your contract
Dealing with debt:
• Request to enroll interest-free repayment program to manage payday loan debts
• Visit idfpr.com or call the Department of Financial and Professional Regulation at 1-888-473-4858 to learn more about loan debt management.
Sources: Illinois Attorney General’s Office, Illinois Department of Financial and Professional Regulation