Gov. J.B. Pritzker on Monday signed into law a debt collection reform package.
The measure calls for lowering interest rates on outstanding consumer debt from 9 percent to 5 percent. It would also trim about a decade off the time a lender can pursue collection.
The legislation would apply to consumer debt under $25,000 for things such as car loans or medical bills. That’s for debts that have had a court judgment.
"Consumer debt is at an all-time high across the United States, and there are millions of people, including too many Illinois families, who are struggling under unconscionable circumstances," Pritzler said. "Today, here in Illinois, we are giving real relief to those who are simply trying to pay off their liabilities so that they can end the cycle of debt that they are trapped in."
State Rep. Will Guzzardi, the Chicago Democrat who sponsored the bill, said often, those facing legal judgments are on a fixed income and have run into a major expense, such a medical bill or a car loan they can’t afford.
“These aren't people who are trying to shirk their obligations. These aren't scofflaws. These are hardworking Illinoisans, who want to pay back what they owe one. Unfortunately, too often they are trapped under a burden of debt interest that they cannot escape — a 9 percent interest rate collected year over year for decades, as permitted right now, by state law,’’ he said. “And that burden is simply inescapable, especially at a time of such low interest rates right now that families simply aren't able to catch up to 9 percent interest year after a year.''
Jody Chong is with the Heartland Alliance, one of the groups in the coalition pushing the bill. She said nearly one-in-five Illinoisans have a debt in collection, and that burden is really falling disproportionately on communities of color.
“In Illinois, predominantly non-white communities have twice as many people in collections as predominantly white communities," Chong said. "And so it's really important that we're thinking about how we help families pay down their debts.”
The measure takes effect January 1st.