SPRINGFIELD, IL -- The Illinois Senate has approved legislation which will bring transparency to a program that allows lenders to claim millions in late payment interest penalties originally owed to vendors who have done business with the state. Republican and Democratic senators came together Tuesday to approve Senate Bill 3560 by a 44-1 margin.
“Lenders in this program are making hundreds of millions of dollars off the state’s fiscal calamity. Taxpayers have a right to know more about who they are and where their financing comes from. This program needs to be governed by state law and there needs to be a basic level of oversight to guard against potential conflicts of interest or corruption,” Comptroller Susana Mendoza said.
The Vendor Payment Program (VPP) was created to assist struggling vendors as the state’s backlog of unpaid bills grew. VPP allows state-approved third-party lenders, known as qualified purchasers, to pay a portion of unpaid bills for vendors up front. In exchange, the purchasers get the late payment interest penalties when they are ultimately paid by the state.
The program is not codified in state law. The lenders play an important role in keeping vendors afloat but little information is made public in terms of how much state debt is purchased through the VPP and there is currently no disclosure of who is financially backing the qualified purchasers. Are there conflicts of interest?
Senate Bill 3560 would put VPP in state statute. It would require information on the program be made available to the public and that the Auditor General Audit VPP.
“Most Illinoisans don't know that the state pays 12% interest on many of its late bills, much less that there are people profiting off the state's dysfunction," Senator Omar Aquino said. "Lenders should be subject to the same level of scrutiny as anyone doing business with the state."
The bill now moves to the House of Representatives.
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