98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB5399

 

Introduced , by Rep. La Shawn K. Ford

 

SYNOPSIS AS INTRODUCED:
 
205 ILCS 670/15  from Ch. 17, par. 5415

    Amends the Consumer Installment Loan Act. Provides that the annual percentage rate shall not exceed 21% for title-secured loans in which an obligor provides to the licensee, as a security for the loan, physical possession of the obligor's title to a motor vehicle. Effective immediately.


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A BILL FOR

 

HB5399LRB098 16868 ZMM 51941 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Consumer Installment Loan Act is amended by
5changing Section 15 as follows:
 
6    (205 ILCS 670/15)  (from Ch. 17, par. 5415)
7    Sec. 15. Charges permitted.
8    (a) Every licensee may lend a principal amount not
9exceeding $40,000 and, except as to small consumer loans as
10defined in this Section, may charge, contract for and receive
11thereon interest at an annual percentage rate of no more than
1236%, subject to the provisions of this Act; provided, however,
13that the limitation on the annual percentage rate shall not
14exceed 21% for contained in this subsection (a) does not apply
15to title-secured loans, which are loans upon which interest is
16charged at an annual percentage rate exceeding 36%, in which,
17at commencement, an obligor provides to the licensee, as
18security for the loan, physical possession of the obligor's
19title to a motor vehicle, and upon which a licensee may charge,
20contract for, and receive thereon interest at the rate agreed
21upon by the licensee and borrower. For purposes of this
22Section, the annual percentage rate shall be calculated in
23accordance with the federal Truth in Lending Act.

 

 

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1    (b) For purpose of this Section, the following terms shall
2have the meanings ascribed herein.
3    "Applicable interest" for a precomputed loan contract
4means the amount of interest attributable to each monthly
5installment period. It is computed as if each installment
6period were one month and any interest charged for extending
7the first installment period beyond one month is ignored. The
8applicable interest for any monthly installment period is, for
9loans other than small consumer loans as defined in this
10Section, that portion of the precomputed interest that bears
11the same ratio to the total precomputed interest as the
12balances scheduled to be outstanding during that month bear to
13the sum of all scheduled monthly outstanding balances in the
14original contract. With respect to a small consumer loan, the
15applicable interest for any installment period is that portion
16of the precomputed monthly installment account handling charge
17attributable to the installment period calculated based on a
18method at least as favorable to the consumer as the actuarial
19method, as defined by the federal Truth in Lending Act.
20    "Interest-bearing loan" means a loan in which the debt is
21expressed as a principal amount plus interest charged on actual
22unpaid principal balances for the time actually outstanding.
23    "Precomputed loan" means a loan in which the debt is
24expressed as the sum of the original principal amount plus
25interest computed actuarially in advance, assuming all
26payments will be made when scheduled.

 

 

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1    "Small consumer loan" means a loan upon which interest is
2charged at an annual percentage rate exceeding 36% and with an
3amount financed of $4,000 or less. "Small consumer loan" does
4not include a title-secured loan as defined by subsection (a)
5of this Section or a payday loan as defined by the Payday Loan
6Reform Act.
7    (c) Loans may be interest-bearing or precomputed.
8    (d) To compute time for either interest-bearing or
9precomputed loans for the calculation of interest and other
10purposes, a month shall be a calendar month and a day shall be
11considered 1/30th of a month when calculation is made for a
12fraction of a month. A month shall be 1/12th of a year. A
13calendar month is that period from a given date in one month to
14the same numbered date in the following month, and if there is
15no same numbered date, to the last day of the following month.
16When a period of time includes a month and a fraction of a
17month, the fraction of the month is considered to follow the
18whole month. In the alternative, for interest-bearing loans,
19the licensee may charge interest at the rate of 1/365th of the
20agreed annual rate for each day actually elapsed.
21    (d-5) No licensee or other person may condition an
22extension of credit to a consumer on the consumer's repayment
23by preauthorized electronic fund transfers. Payment options,
24including, but not limited to, electronic fund transfers and
25Automatic Clearing House (ACH) transactions may be offered to
26consumers as a choice and method of payment chosen by the

 

 

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1consumer.
2    (e) With respect to interest-bearing loans:
3        (1) Interest shall be computed on unpaid principal
4    balances outstanding from time to time, for the time
5    outstanding, until fully paid. Each payment shall be
6    applied first to the accumulated interest and the remainder
7    of the payment applied to the unpaid principal balance;
8    provided however, that if the amount of the payment is
9    insufficient to pay the accumulated interest, the unpaid
10    interest continues to accumulate to be paid from the
11    proceeds of subsequent payments and is not added to the
12    principal balance.
13        (2) Interest shall not be payable in advance or
14    compounded. However, if part or all of the consideration
15    for a new loan contract is the unpaid principal balance of
16    a prior loan, then the principal amount payable under the
17    new loan contract may include any unpaid interest which has
18    accrued. The unpaid principal balance of a precomputed loan
19    is the balance due after refund or credit of unearned
20    interest as provided in paragraph (f), clause (3). The
21    resulting loan contract shall be deemed a new and separate
22    loan transaction for all purposes.
23        (3) Loans must be fully amortizing and be repayable in
24    substantially equal and consecutive weekly, biweekly,
25    semimonthly, or monthly installments. Notwithstanding this
26    requirement, rates may vary according to an index that is

 

 

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1    independently verifiable and beyond the control of the
2    licensee.
3        (4) The lender or creditor may, if the contract
4    provides, collect a delinquency or collection charge on
5    each installment in default for a period of not less than
6    10 days in an amount not exceeding 5% of the installment on
7    installments in excess of $200, or $10 on installments of
8    $200 or less, but only one delinquency and collection
9    charge may be collected on any installment regardless of
10    the period during which it remains in default.
11    (f) With respect to precomputed loans:
12        (1) Loans shall be repayable in substantially equal and
13    consecutive weekly, biweekly, semimonthly, or monthly
14    installments of principal and interest combined, except
15    that the first installment period may be longer than one
16    month by not more than 15 days, and the first installment
17    payment amount may be larger than the remaining payments by
18    the amount of interest charged for the extra days; and
19    provided further that monthly installment payment dates
20    may be omitted to accommodate borrowers with seasonal
21    income.
22        (2) Payments may be applied to the combined total of
23    principal and precomputed interest until the loan is fully
24    paid. Payments shall be applied in the order in which they
25    become due, except that any insurance proceeds received as
26    a result of any claim made on any insurance, unless

 

 

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1    sufficient to prepay the contract in full, may be applied
2    to the unpaid installments of the total of payments in
3    inverse order.
4        (3) When any loan contract is paid in full by cash,
5    renewal or refinancing, or a new loan, one month or more
6    before the final installment due date, a licensee shall
7    refund or credit the obligor with the total of the
8    applicable interest for all fully unexpired installment
9    periods, as originally scheduled or as deferred, which
10    follow the day of prepayment; provided, if the prepayment
11    occurs prior to the first installment due date, the
12    licensee may retain 1/30 of the applicable interest for a
13    first installment period of one month for each day from the
14    date of the loan to the date of prepayment, and shall
15    refund or credit the obligor with the balance of the total
16    interest contracted for. If the maturity of the loan is
17    accelerated for any reason and judgment is entered, the
18    licensee shall credit the borrower with the same refund as
19    if prepayment in full had been made on the date the
20    judgement is entered.
21        (4) The lender or creditor may, if the contract
22    provides, collect a delinquency or collection charge on
23    each installment in default for a period of not less than
24    10 days in an amount not exceeding 5% of the installment on
25    installments in excess of $200, or $10 on installments of
26    $200 or less, but only one delinquency or collection charge

 

 

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1    may be collected on any installment regardless of the
2    period during which it remains in default.
3        (5) If the parties agree in writing, either in the loan
4    contract or in a subsequent agreement, to a deferment of
5    wholly unpaid installments, a licensee may grant a
6    deferment and may collect a deferment charge as provided in
7    this Section. A deferment postpones the scheduled due date
8    of the earliest unpaid installment and all subsequent
9    installments as originally scheduled, or as previously
10    deferred, for a period equal to the deferment period. The
11    deferment period is that period during which no installment
12    is scheduled to be paid by reason of the deferment. The
13    deferment charge for a one month period may not exceed the
14    applicable interest for the installment period immediately
15    following the due date of the last undeferred payment. A
16    proportionate charge may be made for deferment for periods
17    of more or less than one month. A deferment charge is
18    earned pro rata during the deferment period and is fully
19    earned on the last day of the deferment period. Should a
20    loan be prepaid in full during a deferment period, the
21    licensee shall credit to the obligor a refund of the
22    unearned deferment charge in addition to any other refund
23    or credit made for prepayment of the loan in full.
24        (6) If two or more installments are delinquent one full
25    month or more on any due date, and if the contract so
26    provides, the licensee may reduce the unpaid balance by the

 

 

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1    refund credit which would be required for prepayment in
2    full on the due date of the most recent maturing
3    installment in default. Thereafter, and in lieu of any
4    other default or deferment charges, the agreed rate of
5    interest or, in the case of small consumer loans, interest
6    at the rate of 18% per annum, may be charged on the unpaid
7    balance until fully paid.
8        (7) Fifteen days after the final installment as
9    originally scheduled or deferred, the licensee, for any
10    loan contract which has not previously been converted to
11    interest-bearing under paragraph (f), clause (6), may
12    compute and charge interest on any balance remaining
13    unpaid, including unpaid default or deferment charges, at
14    the agreed rate of interest or, in the case of small
15    consumer loans, interest at the rate of 18% per annum,
16    until fully paid. At the time of payment of said final
17    installment, the licensee shall give notice to the obligor
18    stating any amounts unpaid.
19(Source: P.A. 96-936, eff. 3-21-11.)
 
20    Section 99. Effective date. This Act takes effect upon
21becoming law.