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Illinois Legislature Adopts 36% Interest Rate Cap on Consumer Loans | Manatt, Phelps & Phillips, srl


The Illinois legislature passed new law setting a 36% interest rate cap on most consumer loans.

What happened

Under the new bill, “a lender shall not incur or receive any charges exceeding an annual percentage rate of 36% on the unpaid balance of the amount financed”. Article 15-5-5. The new law designates the use of the same APR calculation method that is used under federal law for military-related loans.

The law excludes commercial loans and grants an exemption for banks (national or non-state banks), credit unions, and insurance companies duly licensed under state or federal law.

The law designates any violation of the interest rate cap as also a violation of the Illinois Consumer Fraud and Deceptive Marketing Practices Act. Illinois regulators also have the authority to take enforcement action and impose fines of up to $ 10,000 per violation. In addition, any loan granted in excess of the new limit, subject to applicable exceptions, is null and void.

Why is this important

Before the law was passed, Illinois generally allowed parties to contract for any desired rate of interest. As a result, some consumer credit products prior to the passage of the bill regularly exceeded the APR by 150% on an annualized basis.

The bill will come into force immediately if signed by the governor, or 60 days after its passage by the legislature on January 14, 2021, if the governor does not sign but does not exercise a veto.


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