The federal government should step in and regulate what are known as payday loan businesses, an area where the state of Illinois has failed to protect consumers.

The federal Consumer Financial Protection Bureau is currently considering rules that would require such lenders to determine the borrower's ability to repay the loan and to limit the length of time lenders can keep borrowers in debt. The federal government cannot regulate the interest rates charged by such institutions, which can range up to 400 percent per year or higher in states where it isn't regulated.

Illinois has had opportunities to regulate these institutions, but Illinois bureaucrats and politicians have failed to do so.

Illinois People's Action, which has worked on the payday loan issues for years, says there are about 27 such institutions in Decatur and that these businesses take $1.7 million out of Decatur each year. What's insidious about this business is that while claiming to a short-term lender to help people through a temporary cash crunch, their business success is really predicated on rolling the loan over and charging additional service fees.

In a typical situation, borrowers provide a lender with a personal check dated for the next payday or permission to debit their bank account two weeks later, with a finance charge added. But the loans rarely end at that point.

Instead, the borrowers often roll the loans over several times, racking up fees in the process. The typical payday borrower will pay more than $450 in fees for a $350 loan, according to experts in the field. According to the Consumer Financial Protection Bureau more than 75 percent of payday loan fees were generated by borrowers with more than 10 loans a year.

The Department of Defense, which caps loan rates to members of the military at 36 percent, said ``the debt trap is the rule not the exception.''

There is no doubt that borrowers need to be aware of pitfalls of a payday loan. At the same time, government should offer these borrowers some protection from the lenders.

The rules suggested by the consumer protection bureau would help borrowers avoid this financial trap. The payday loan business has a large lobbying force, so the change will not happen easily. The bureau plans to discuss the rules in the next few weeks and a decision is expected inside of a few months.

For now, borrowers need to be aware of the pitfalls of payday loans. And those concerned about the issue need to contact their Congress members and express their desire to have some regulations placed upon this industry.

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