In Illinois, a promise to protect borrowers from predatory lending practices resulted instead in removing much-needed credit lines for those who need them most. The Illinois Predatory Loan Prevention Act (PLPA), which capped interest at 36% Annual Percentage Rate (APR) five years ago, created dramatic and damaging consequences for residents of the Prairie State.

Both history and theory show that when lenders are prevented from loaning on their terms, they simply reduce or stop lending. When people seeking loans consequently struggle to secure them, they do not stop borrowing money; they simply find less-desirable sources. 

Despite misleading and emotion-based claims to the contrary, statistical results in Illinois illustrate yet again the damage inherent in government micromanagement of loan agreements. 

Lenders Leaving The Market

In the first year following implementation of the interest rate cap, the number of lending licenses issued in Illinois fell by a staggering 45%, and 350 installment lender licenses expired. Legislators did not reverse course, however, and the number of lender licenses fell by a total of 70% between 2021 and 2025.

The state’s current government website nevertheless boasts that since the PLPA took effect, “[T]he number of traditional lenders who make loans at or under 36% APR has grown.” It fails to mention that the total number of new licenses reached just 172, not even half of those lost in the first year after the PLPA took effect. 

Alternative Revenue Streams

These 172 new traditional lenders did not automatically fill the needs of high-risk borrowers, whose credit ratings did not improve just because their previous lenders left the market. 

High-risk individuals in need of money who are cut off from credit lines either go without necessities, which make up the majority of credit card purchases, or they find money elsewhere. 

For example, pawn stores in Illinois can still charge up to 243% APR, so residents who have been “rescued” from 37% interest now face more than five times that rate (or to sell their items for a pittance). Some have also taken their business online by using lenders from less-restrictive states. Despite debate about the legality of the practice, some court cases favor out-of-state high-rate lenders, so the transactions continue to occur.

Missed Payments

Rate-cap activists often blame high-interest loans for increased delinquency numbers. However, research indicates that when legislators dictate rate cuts, people still make ends meet by simply skipping or delaying payments.

A 2025 study conducted by the Federal Reserve Bank of New York examined the collective effects of rate caps on three states, including Illinois, that had adopted a 36% limit. The study concluded that, along with contraction of credit and expansion of workaround methods, overall delinquency rates and resulting credit standing remained firm. Borrowers were no more likely to bring their accounts up to date or improve their credit health, and lenders were no more likely to receive timely payments, when interest rates dropped.

Seeking Greener Pastures

Beleaguered Illinois residents have received repeated financial blows from their elected officials, and like their counterparts in other restrictive states, they are running to areas with less burdensome leaders. Illinois is bleeding residents more quickly than any state except California and New York, and escapees cite stifling regulations and financial burdens as major reasons for leaving. Interest rate caps fit into both categories.

History repeatedly teaches the same lessons, and Illinois legislators must learn them if they want to retain their residents and get their state off the slew of “worst” lists where it keeps landing. Economic policies do not operate in a vacuum. The results of market manipulation infect every aspect of a state, and attempting to control residents’ financial decisions is doomed to repeat the same negative outcomes.