With a buffet of payday loan stores, auto title loan locations and “cash for gold” joints dotting Elgin, does the city really need a pawnshop?

The Elgin City Council answered that question Wednesday night with a yes, saying pawnshops have tougher regulations, charge lower interest rates than loan stores and could provide people strapped for cash with a viable and safe alternative.

“Many consumers who take out short-term loans are doing so as a last resort to pay their bills and provide for their families. It is all too easy for lenders to take advantage of them by raising interest rates and setting very short repayment periods,” said Governor Quinn. “It is important that we do everything we can to protect these consumers who are already hurting, by helping to make these loans more affordable.”

Payday loan companies will face limits on how much interest they can charge under legislation Gov. Pat Quinn signed into law this afternoon.

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Interest rates on payday loans also would be limited, with rates being capped at $15.50 for every $100 borrowed over a two-week period. Additionally, loan firms would have to verify that a borrower has the ability to repay a loan and would not be allowed to issue pay day loans if monthly payments would exceed 25 percent of a person’s gross monthly income. That limit drops to 22.5 percent for those taking out longer consumer installment loans.

In action Wednesday, the Illinois House signed off on changes aimed at closing loopholes in the state’s lending laws that have allowed some companies to charge rates as high as 700 percent.

 The measure is a compromise between consumer groups and lenders and would impose a cap of 99 percent on loans under $4,000 and 36 percent for those above that level.

 Other changes include allow lenders to increase the term of loans from four to six months. 

The Illinois General Assembly is on the cusp of capping for the first time the interest rates that consumer finance companies can charge borrowers.

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The Payday Loan Reform Act, meanwhile, would be amended to increase the allowed terms of the loans to six months from four. Remaining the same is the limit of charging no more than $15.50 per $100 loaned out every two weeks.

At the same time, payday lenders won’t be allowed to offer their loans under the Consumer Loan Installment Act, a law that is meant to apply to loans secured by car titles and signed-check loans made by credit-card companies and other consumer finance firms.

“The agreement is historic in Illinois,” says Lynda DeLaforgue, co-director of Citizen Action Illinois. “We will for the first time have set rates on these unsecured loans made to the most vulnerable borrowers.”

A representative of the association representing many of the state’s largest payday lenders called the deal fair, but said it would result in fewer lenders.

Most of the bills were inspired by last year’s economic collapse and credit crisis, which prompted a huge government banking bailout. “It was costly to taxpayers, and it was a dangerous precedent that implied government intervention when companies fail,” Bean said at a news conference at the Metcalf Federal Building in Chicago. “This kind of precedent we have to undo, and it’s the kind of mistake we can’t repeat.”

The cornerstone is the Financial Stability Improvement Act, which Bean said would avert government bailouts through accountability by creating a Systemic Dissolution Authority, which would be charged with overseeing the demise of failing firms previously deemed “too big to fail.”

“This is the anti-bailout. This means when a company fails, heads are going to roll. There will be consequences,” Bean said. “Essentially, if your company fails, you’re fired.”

No argument there.   But why then throw in all the consumer lending services that are currently regulated by the states?

If approved, an amendment to Elmhurst’s zoning ordinance pushed through the Development, Planning, and Zoning Committee on Monday could soon bar any future pawn shops from moving into town.

But not quite the way you would think.

Wary of the potential litigation that an outright ban on pawn shops might bring, the committee opted to use the recommendation authored by the Zoning and Planning Commission in August, which advocated restricting pawns shops to a conditional use in zoning district C3.

The move would amend the city’s zoning ordinance so pawn shops will not be permitted in the C1, C2, and C4 districts that make up Elmhurst’s downtown business center. A conditional use of pawn shops still would be allowed in district C3, which includes a stretch of York Avenue from Crestview to Grand avenues, most of Lake Street, and part of Route 83.

2. Plan your spending

Create a budget that accounts for all income and expenses. Plan funds for every category, and discipline yourself not to spend more. Be sure to devote some amount — even if only a few dollars a week — to saving for unexpected costs.

3. Create an emergency fund

Set aside money you will not touch except in an emergency. Jump-start your fund by brown-bagging lunch, avoiding extras like coffee or CDs, holding a yard sale, or taking on a second job. Put the proceeds in a simple savings account that you will not accidentally empty. It is not a good idea to keep a lot of cash around the house, but if you must keep funds in cash, hide the money well — even from yourself.

That third suggestion is a great one, but not always achievable.