A devastating new law that will destroy non-bank lending in Illinois recently received support in the form of an opinion piece in the Chicago Sun-Times. In it, the authors claim that public banks and the US Postal Service could pick up the slack, as credit options for non-prime borrowers are severely curtailed in the state.
Few, if any, make small dollar loans to non-prime borrowers. This is because economic realities prevent it: The cost of making non-prime loans is so high, the risk so great, and the returns so low, it is not possible for banks to cover the costs of making them.
And of the Postal Service:
One…gets the feeling that its proponents are less concerned with the provision of small dollar credit than with creating a new revenue source for the ailing U.S. Postal Service.
He finishes with a point that had escaped the opinion piece writers’ attention, pointing out that Illinois always had an alternative to payday lenders, in the form of installment lenders and that the chances of public banks or the Postal Service “riding to the rescue” in any timeframe that would be useful to disenfranchised borrowers “are vanishingly small.”
We could not agree more. Illinois’ new law is going to increase levels of hardship and inequality in the State. It must be modified or repealed at the earliest opportunity.
SOURCE: Chicago Sun-Times