HB4554ham001 102ND GENERAL ASSEMBLY

Rep. Maurice A. West, II

Filed: 2/7/2022

10200HB4554ham001 LRB102 22903 BMS 34666 a

AMENDMENT TO HOUSE BILL 4554

AMENDMENT NO. ______. Amend House Bill 4554 by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Consumer Income Share Agreement Act.

Section 5. Definitions. As used in this Act:

"Amount financed" means the amounts advanced by the licensee to the consumer or on behalf of the consumer or, if the licensee is a merchant financing the sale of goods or services to the consumer using an income share agreement, the amount credited by the licensee toward the purchase of such goods and services on behalf of the consumer.

"Annual percentage rate" or "APR" means the percentage rate calculated according to the Federal Reserve Board's methodology as set forth under Regulation Z, 12 CFR Part 1026. The "annual percentage rate" of an income share agreement is the measure of the cost of the income share agreement, expressed as a yearly rate, that relates to the amount and timing of value received by the consumer to the amount and timing of payments made. The "annual percentage rate" is determined in accordance with either the actuarial method or the United States rule method.

"Consumer" means a natural person who enters into an income share agreement for personal, family, or household use.

"Department" means the Department of Financial and Professional Regulation.

"Director" means the Director of the Division of Financial Institutions of the Department of Financial and Professional Regulation.

"Disposable earnings" means that part of the earnings of an individual remaining after the deduction from total earnings of amounts required by law to be withheld.

"Educational ISA" means an income share agreement that:

(1) is not made, insured, or guaranteed under Title IV of the Higher Education Act of 1965, 20 U.S.C. 1070 et seq., or another federally subsidized educational finance program;

(2) is extended to a consumer expressly, in whole or in part, for postsecondary educational expenses, tuition, or other obligations of, or pays amounts to, or on behalf of, such individual for costs associated with a postsecondary training program or any other program designed to increase the individual's human capital, employability, or earning potential, and is not limited to programs eligible to participate as programs under Title IV of the Higher Education Act of 1965, 20 U.S.C. 1070 et seq., as well as any personal expenses, such as books, supplies, transportation, and living costs, incurred by the individual while enrolled in such a program and any other costs or expenses included in the definition of a "qualified higher education expense" as specified in 26 U.S.C. 529(e)(3)(A), including refinancing of loans or income share agreements used for the purposes described in this paragraph, and regardless of whether the income share agreement is provided by the educational institution that the consumer attends; and

(3) does not include loans, open-end credit, or any loan or income share agreement that is secured by real property or a dwelling.

"Federal poverty guidelines" means the poverty guidelines updated periodically in the Federal Register by the U.S. Department of Health and Human Services under the authority of 42 U.S.C. 9902(2).

"Garnishment" means any legal or equitable procedure through which earnings of an individual are required to be withheld for payment of the income share agreement.

"Income" means the salary, wages, income, tips, capital gains, earnings, and other sources of income of a consumer as set forth in an income share agreement.

"Income share agreement" or "ISA" means an agreement between a consumer and an ISA provider under which:

(1) the ISA provider advances a sum of money to the consumer or to a third party on the consumer's behalf or, if the ISA provider is a seller of goods or services to the consumer, the ISA provider credits toward the purchase of such goods or services;

(2) the consumer is obligated to make periodic payments, if any become due, to the ISA provider calculated, based upon, or determined by the consumer's income;

(3) the consumer's obligation to make payments, if any become due, to the ISA provider is conditional on the consumer's income exceeding the income threshold set forth in the income share agreement;

(4) there is an ISA duration; and

(5) each of these elements is available at the time of contracting of the income share agreement.

"Income threshold" means a fixed dollar amount that, if a consumer earns less than such amount during the relevant period, the consumer is not required to make a payment for such payment period.

"Index" means the Consumer Price Index for Urban Wage Earners and Clerical Workers: U.S. City Average, All Items, 1967=100, compiled by the Bureau of Labor Statistics, United States Department of Labor.

"ISA duration" means the maximum length of time during which income may be subject to an ISA payment, absent periods of payment relief pause at the request of the consumer. "ISA duration" does not include periods of payment relief pause.

"ISA maximum number of payments" means the maximum number of ISA payments during ISA payment periods in which the consumer's income is equal to or greater than the income threshold that a consumer could be required to make. "ISA maximum number of payments" does not include periods of payment relief pause.

"ISA payment" means the amount of a consumer's periodic payment obligation, if any, based on the terms of the income share agreement. The "ISA payment" is equal to the product of the ISA percentage multiplied by the consumer's income, except in cases of an ISA where the ISA payment amount is determined by a schedule of fixed amounts based on a consumer's income in a given payment period. An "ISA payment" is required only for income earned during an ISA payment period in which the consumer's income was equal to or greater than the income threshold.

"ISA payment cap" means the maximum amount of money a consumer must pay to satisfy the terms of an income share agreement.

"ISA percentage" or "percentage" means the percentage of income or schedule of percentages of income or fixed amounts based on the consumer's income in a given ISA payment period used to calculate a consumer's ISA payment pursuant to an income share agreement.

"ISA provider" means a person who provides funding to a consumer pursuant to an income share agreement or, if the ISA provider is a seller of goods and services, the seller.

"Licensee" means a person who is licensed under this Act.

"Net worth" means total assets minus total liabilities.

"Payment relief pause" means a period of time that is requested by the consumer during which the consumer is not required to make payments despite the consumer's income exceeding the income threshold.

Section 10. License required to engage in business. Without a license provided under this Act, no person, partnership, association, limited liability company, or corporation may engage in the business of:

(1) making income share agreements; or

(2) taking assignments of and undertaking direct collection of payments from or enforcement of rights against consumers arising from income share agreements, except for collection of payments and enforcement of rights for 3 months without a license if the person or entity promptly applies for a license and the application has not been denied.

Section 15. Application for income share agreement license; fees; surety bond.

(a) Application for a license shall be in writing and in a form prescribed by the Director. The applicant at the time of making an application shall pay the Director the sum of $300 as an application fee and the additional sum of $450 as an annual license fee for a period terminating on the last day of the current calendar year; however, if the application is filed after June 30 in any year, the license fee shall be half of the annual license fee for the year.

(b) Before the license is granted, every applicant shall provide in a form satisfactory to the Director that the applicant has or will maintain a positive net worth in a minimum of $30,000. Every applicant and licensee shall maintain a surety bond in the principal sum of $25,000 issued by a bonding company authorized to do business in this State and that shall be approved by the Director. The bond shall run to the Director and shall be for the benefit of any consumer who incurs damages as a result of a violation of this Act or rules adopted pursuant to this Act by a licensee. If the Director at any time finds that a bond is of insufficient size, is insecure, is exhausted, or is otherwise doubtful, an additional bond in such amount as determined by the Director shall be filed by the licensee within 30 days after written demand therefor by the Director.

Section 20. Appointment of attorney-in-fact for service of process. Every licensee shall appoint, in writing, the Director and his or her successors in office or any official who shall be charged with the administration of this Act, as attorney-in-fact upon whom all lawful process against the licensee may be served within the same legal force and validity as if served on the licensee. A copy of such written appointment, duly certified, shall be filed in the office of the Director, and a copy thereof certified by him or her shall be sufficient evidence. This appointment shall remain in effect while any liability remains outstanding in this State against the licensee. When summons is served upon the Director as attorney-in-fact for such licensee, the Director shall immediately notify the licensee by registered mail, enclosing the summons and specifying the hour and day of service.

Section 25. Investigation; license issuance.

(a) Upon the filing of an application and the payment of the fees, the Director shall investigate to determine:

(1) that the reputation of the applicant, including the managers of a limited liability company, and the partners, owners, officers, or directors thereof warrants belief that the business will be operated honestly and fairly within the purposes of this Act; and

(2) that the applicant meets the positive net worth requirements of this Act.

Unless the Director makes findings enumerated in this subsection, he or she shall not issue a license and shall notify the applicant of the denial and return to the applicant the sum paid by the applicant as a license fee, but shall retain the $300 application fee. The Director shall approve or deny every application for license within 60 days after the filing of an application with payment of a fee.

(b) Upon written request, the applicant is entitled to a hearing on the question of his or her qualifications for a license if:

(1) the Director notifies the applicant in writing that his or her application has been denied; or

(2) the Director does not issue a license within 60 days after the application for the license was filed.

A request for a hearing may not be made more than 15 days after the Director mails a writing to the applicant notifying him or her that the application has been denied and stating in substance the Director's findings supporting denial.

Section 30. License. The license shall state the address, including the city and state, at which the business is to be conducted and shall state fully the name of the licensee. The license shall be conspicuously posted in the place of business of the licensee and shall not be transferable or assignable.

Section 35. License; place of business.

(a) Not more than one place of business shall be maintained under the same license, but the Director may issue more than one license to the same licensee upon compliance with all the provisions of this Act governing the original issuance of a license. A webpage operated by the licensee shall constitute a location.

(b) Whenever a licensee changes his or her place of business to a location other than that set forth in the license, he or she shall give written notice to the Director at least 10 days before the relocation. However, if the new location is in excess of 15 miles from the previous location, the licensee shall obtain written approval from the Director before relocation.

Section 40. Annual license fee; expenses.

(a) Before December 1 of each year, a licensee shall pay to the Director, and the Department must receive, the annual license fee required by this Act for the next succeeding calendar year. The license shall expire on January 1 of the following year unless the licensee fee has been paid before then.

(b) In addition to the license fee, the reasonable expense of any examination, investigation, or custody by the Director under any provisions of this Act shall be borne by the licensee.

(c) If a licensee fails to renew his or her license by December 31, it shall automatically expire and the licensee is not entitled to a hearing; however, the Director, in his or her discretion, may reinstate an expired license upon payment of the annual renewal fee and proof of good cause for failure to renew.

Section 45. Suspension or revocation of license.

(a) The Director may issue to a licensee an order to show cause why his or her license should not be suspended for a period not in excess of 6 months or be revoked. The order shall set a place for a hearing and a time therefor that is no less than 10 days after the date of the order. After the hearing, the Director shall revoke or suspend the license, or, if there are mitigating circumstances, may accept an assurance of discontinuance and allow retention of the license, if the Director finds that:

(1) the licensee has repeatedly and intentionally violated this Act or any rule or order lawfully made pursuant to this Act, or has violated an assurance of discontinuance; or

(2) facts or conditions exist that clearly would have justified the Director in refusing to grant a license for that place or those places of business were the facts or conditions known to exist at the time the application for the license was made.

(b) A revocation or suspension of a license is not lawful unless the Director, before instituting proceedings, gives notice to the licensee of the facts or conduct that warrant the intended action and the licensee is afforded an opportunity to show compliance with all lawful requirements for retention of the license.

(c) If the Director finds that probable cause for revocation of a license exists and that enforcement of this Act requires immediate suspension of the license pending investigation, the Director, after a hearing upon 10 days' written notice, may enter an order suspending the license for not more than 30 days.

(d) Whenever the Director revokes or suspends a license, he or she shall enter an order to that effect and forthwith notify the licensee of the revocation or suspension. Within 10 days after entry of the order he or she shall deliver to the licensee a copy of the order and the findings supporting the order.

(e) A person holding a license to make income share agreements may relinquish the license by notifying the Director in writing of its relinquishment, but the relinquishment does not affect his or her liability for acts previously committed.

(f) Revocation, suspension, or relinquishment of a license does not impair or affect the obligation of any preexisting lawful contract between the licensee and any consumer.

(g) The Director may reinstate a license, terminate a suspension, or grant a new license to a person whose license has been revoked or suspended if no fact or condition then exists that clearly would have justified the Director in refusing to grant a license.

Section 50. Closing of business; surrender of license.

(a) At least 10 days before a licensee ceases operations, closes business, or files for bankruptcy, the licensee shall do the following:

(1) Notify the Department of its action in writing.

(2) With the exception of filing for bankruptcy, surrender its license to the Director for cancellation; the surrender of the license shall not affect the licensee's civil or criminal liability for acts committed before surrender or entitle the licensee to return any part of the annual license fee.

(3) Notify the Director of the location where the books, accounts, contracts, and records will be maintained and the procedure to ensure prompt return of contracts, titles, and releases to the customers.

(4) Ensure that the accounts, books, records, and contracts shall be maintained and serviced by the licensee or another licensee under this Act or an entity exempt from licensure under this Act.

(b) The Department shall have the authority to conduct examinations of the books, records, and loan documents at any time after surrender of the license, filing of bankruptcy, or the cessation of operations.

Section 55. Examinations and investigations of conduct of business.

(a) The Director shall examine periodically, at intervals he or she deems appropriate but not less than once per year, income share agreements, business, and records of every licensee. In addition, for the purpose of discovering violations of this Act or securing information lawfully required, the Director at any time may investigate the income share agreements, business, and records of any licensee. For these purposes the Director shall have free and reasonable access to the offices, places of business, and records of the licensee.

(b) If the licensee's records are located outside this State, the licensee at the Director's request shall make them available to the Director at a convenient location within this State, or pay the reasonable and necessary expenses for the Director or his or her representative to examine them where they are located. The Director may designate representatives, including comparable officials of the state in which the records are located, to inspect them on the Director's behalf.

(c) For purposes of this Section, the Director may administer oaths or affirmations, and upon request of a party or his or her own motion may subpoena witnesses, compel their attendance, adduce evidence, and require the production of any matter that is relevant to the investigation, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of relevant facts or any other matter reasonably calculated to lead to the discovery of admissible evidence.

(d) Upon failure without lawful excuse to obey a subpoena or to give testimony and upon reasonable notice to all persons affected thereby, the Director may apply to the court for an order compelling compliance.

Section 60. Books and records.

(a) Every licensee shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the Director to determine whether the licensee is complying with this Act. The recordkeeping system of a licensee is sufficient if it makes the required information reasonably available. The records pertaining to any income share agreement need not be preserved for more than 2 years after making the final entry relating to the income share agreement.

(b) On or before April 15 of each year, every licensee shall file with the Director a composite annual report in a form prescribed by the Director relating to all income share agreements made by the licensee. Information contained in annual reports shall be confidential and may be published only in composite form.

Section 65. No other business allowed.

(a) A licensee may not carry on other business for the purpose of evasion or violation of this Act at a location where the licensee makes income share agreements.

(b) Upon application by the licensee, the Director may approve the conduct of other businesses not specifically permitted by this Act in the licensee's place of business, unless the Director finds that such conduct will conceal or facilitate evasion or violation of this Act. The Director's approval shall be in writing and shall describe the other businesses which may be conducted in the licensed office.

Section 70. Prohibitions.

(a) No licensee shall take any power of attorney in connection with an income share agreement.

(b) A consumer may not authorize any person to confess judgment on a claim arising out of an income share agreement. An authorization in violation of this Section is void.

Section 75. Pledge or sale of income share agreement.

(a) No licensee or other person shall pledge, hypothecate, or sell an income share agreement entered into under this Act by a consumer except to another licensee under this Act, a bank, savings bank, savings and loan association, or credit union created under the laws of this State or the United States, or to other persons or entities authorized by the Director in writing. Sales of such notes by licensees under this Act or other persons shall be made by agreement in writing and shall authorize the Director to examine the income share agreement documents so hypothecated, pledged, or sold.

(b) A consumer may pay the original ISA provider until he or she receives notification of assignment of rights to payment pursuant to an income share agreement and that payment is to be made to the assignee. A notification that does not reasonably identify the rights assigned is ineffective. If requested by the consumer, the assignee shall seasonably furnish reasonable proof that the assignment has been made and unless the proof is furnished the consumer may pay the original ISA provider.

(c) An assignee of the rights of the ISA provider is subject to all claims and defenses of the consumer against the ISA provider arising from the income share agreement. A claim or defense of a consumer may be asserted against the assignee under this Section only if the consumer has made a good faith attempt to obtain satisfaction from the ISA provider with respect to the claim or defense and then only to the extent of the amount owing to the assignee with respect to the ISA provider or defense that arose at the time the assignee has notice of the claim or defense. Notice of the claim or defense may be given before the good faith attempt specified in this subsection. Oral notice is effective unless the assignee requests written confirmation when or promptly after oral notice is given and the consumer fails to give the assignee written confirmation within the period of time, not less than 14 days, stated to the consumer when written confirmation is requested. An agreement may not limit or waive the claims or defenses of a consumer under this Section.

Section 80. Monthly payment affordability.

(a) Maximum income percentage. Each income share agreement shall specify the ISA percentage applicable to the income share agreement and shall comply with the following:

(1) The income share agreement may not include an ISA percentage in excess of 20%, or if an ISA defines a series of fixed amounts based on the consumer's income, such amounts shall not equate to more than 20% of the consumer's income.

(2) A licensee may not enter into an educational ISA with a consumer if the consumer would be committing more than 20% of his or her income, inclusive of other educational ISA and education loans known at the time. The licensee must confirm a consumer's educational ISA and education loan liabilities through a verifiable third-party source. At a minimum, the licensee must confirm such liabilities using information maintained by a nationwide consumer reporting agency, as defined by 15 U.S.C. 1681a(f), and doing so is sufficient for meeting the requirement in this paragraph; however, nothing in this paragraph shall prohibit a licensee from using other sources to provide additional verification. For the purposes of calculating the portion of a student's future income that would be consumed by the educational ISA for which the student has applied and other educational ISAs and education loans known at the time, the ISA provider shall calculate the aggregate future burden of all such obligations, including the educational ISA for which the student is applying, at hypothetical future income levels ranging from the income threshold of the ISA for which the student has applied up to $70,000, with such number adjusting for inflation each year, in increments of $10,000. The terms of the educational ISA for which the student has applied cannot cause the student's aggregate future burden to exceed the limit in subsection (b) at any of the income increments stated in this paragraph. For the purpose of calculating the percentage burden of an educational ISA at a given future income level, the ISA provider shall use the income percentage that would be applicable for the ISA at such income level, or the fixed amount divided by the income level, where applicable. For the purpose of calculating the percentage burden of an educational loan at a given future income level, the ISA provider shall divide the annual payment obligation by income level using the most affordable payment option that would be available to the student at such income level under such loan. For students enrolled in a Title IV program, as part of this analysis the ISA provider shall assume a federal loan balance equal to the larger of (1) the student's existing federal loan balance, and (2) the maximum amount the student is eligible to borrow under Federal Direct Stafford Loans for his or her status, dependent or independent.

(b) Protections during periods of low earnings. The income share agreement must state that when a consumer has income that is equal to or below the income threshold set forth in the income share agreement that the consumer's payment obligation is zero dollars. The income threshold at the time of origination must be high enough such that the consumer's gross income minus any income share agreement obligation must leave the consumer with gross income equal to at least 200% of the federal poverty guidelines for a single person.

(c) Required payment relief pauses. An income share agreement must offer at least 3 months of voluntary payment relief pauses, so long as a consumer's current income at the time of requesting the payment relief pause is equal to or less than 400% of the federal poverty guidelines for a single individual, for every 30 income-determined payments required under the income share agreement.

Section 85. Maximum effective annual percentage rate. An income share agreement must specify that the maximum amount that a consumer could be required to pay based on the consumer's income under the income share agreement will not result in a consumer ever being required to pay an effective annual percentage rate that is greater than 36%. If at any time the consumer makes payment of an amount that would cause the limit in this Section to apply, all further obligations under the income share agreement shall cease.

Section 90. Limits on duration of income share agreements.

(a) An income share agreement shall specify that the maximum number of payments may not exceed 240 monthly payments.

(b) An income share agreement shall specify that the ISA duration may not exceed 360 months, except in the case of a payment relief pause requested by the consumer.

Section 95. Risk sharing.

(a) A licensee may not contract for income share agreement terms that would result in a consumer having income that is less than or equal to 300% of the federal poverty guidelines for a single person for the ISA duration being required to make a stream of ISA payments that would yield an effective APR greater than 8%, or the high yield of the 10-year United States Constant Maturity Treasury Notes auctioned at the final auction held before the current calendar year in which an ISA offering is made plus 7%, whichever is greater.

(b) A licensee may not contract for income share agreement terms that would result in a consumer having income that is less than or equal to 400% of the federal poverty guidelines for a single person for the ISA duration being required to make a stream of ISA payments that would yield an effective APR greater than 12%, or the high yield of the 10-year United States Constant Maturity Treasury Notes auctioned at the final auction held before the current calendar year in which an ISA offering is made plus 11%, whichever is greater.

(c) A licensee may not contract for income share agreement terms that would result in a consumer having income that is less than or equal to 500% of the federal poverty guidelines for a single person for the ISA duration being required to make a stream of ISA payments that would yield an effective APR greater than 15%, or the high yield of the 10-year United States Constant Maturity Treasury Notes auctioned at the final auction held before the current calendar year in which an ISA offering is made plus 14%, whichever is greater.

(d) A licensee may not contract for income share agreement terms that would result in a consumer having income that is less than or equal to 600% of the federal poverty guidelines for a single person for the ISA duration being required to make a stream of ISA payments that would yield an effective APR greater than 18%, or the high yield of the 10-year United States Constant Maturity Treasury Notes auctioned at the final auction held before the current calendar year in which an ISA offering is made plus 17%, whichever is greater.

(e) For the purposes of determining the various tiers set forth in this Section, a licensee shall calculate the effective APR by determining the various federal poverty guidelines tiers at the time the consumer's income share agreement is originated and assuming such amounts are fixed through the ISA duration.

(f) For the purposes of determining ISA duration in this Section: in the case of an educational ISA, a licensee shall assume the ISA duration started after a period equal to the expected length of the program for which a consumer is enrolling; or in the case of a non-educational ISA, a licensee shall assume the ISA duration started immediately.

Section 100. Limits on covered income. An income share agreement must specify the definition of income to be used for the purposes of calculating a consumer's payment obligation under the income share agreement. No income share agreement shall include any of the following in its definition of income:

(1) The income of the consumer's children or dependents.

(2) Any amount paid by the consumer under Title II or XVI of the Social Security Act, 42 U.S.C. 401 et seq., 42 U.S.C. 1381 et seq.; or under a State program funded by Title IV of the Social Security Act, 42 U.S.C. 601 et seq.

(3) Individual retirement account distributions.

(4) Pensions and annuities.

(5) Social security benefits.

(6) Other sources of federal or State aid provided to individuals through any of the following:

(A) unemployment programs;

(B) disaster relief programs;

(C) Medicare or Medicaid benefits;

(D) benefits received through the Supplemental Nutrition Assistance Program;

(E) economic impact payments; or

(F) other income excluded from the definition of taxable income set forth by the Internal Revenue Service.

Section 105. Fees permitted. In addition to the ISA percentage permitted by this Act, a licensee may contract for and receive the following additional charges:

(1) Official fees and taxes.

(2) A fee, which shall not exceed the sum of $25, for failure to provide documentation to the licensee for the confirmation and reconciliation of the consumer's income.

(3) A fee for processing any forms to confirm the consumer's income with the United States Internal Revenue Service or a State department of revenue or taxation on a dollar-for-dollar, pass-through basis of the expenses incurred by the licensee.

(4) A late payment fee in an amount of $20 or 5% of the late payment, whichever is greater, for any payment that is more than 15 days past due; no late payment fee may be charged more than once per late payment.

(5) An amount not exceeding $25, plus any actual expenses incurred in connection with a check or draft that is not honored because of insufficient or uncollected funds or because no such account exists.

(6) Charges for other benefits conferred on the consumer, if the benefits are of value to her or him and the charges are reasonable in relation to the benefits, are of a type that is not for credit, and are authorized as permissible additional charges by rule adopted by the Department.

(7) Before or after default in payment of a scheduled payment of an income share agreement, the parties to the income share agreement may agree in writing to a deferral of all or part of one or more unpaid payments and the licensee may make, at the time of deferral and receive at that time or at any time thereafter, a deferral charge not exceeding an amount equal to 10% of the missed payment.

Section 110. Restriction on security interest. Under no circumstances shall a licensee take a security interest in any collateral in connection with an income share agreement.

Section 115. Discharge of obligations.

(a) All further obligations under an income share agreement, except those accruing before the date of determination by a relevant governmental agency, shall terminate if the consumer is deemed totally and permanently disabled by the applicable governmental agency.

(b) All further obligations under the income share agreement, except those accruing before the consumer's death, shall terminate upon the death of the consumer.

Section 120. Prohibition on co-signers. No income share agreement shall include or permit the use of a co-signer in connection with any obligation related to an income share agreement.

Section 125. Limitation on acceleration.

(a) Licensees may not attempt to accelerate or otherwise liquidate a future payment stream under an income share agreement.

(b) Notwithstanding subsection (a), nothing in this Section shall prevent a licensee from collecting or pursuing any other remedy available to the licensee for the collection of amounts that were due from the consumer under an income share agreement but that were not paid or properly remitted to the licensee. These amounts may include projected future payments as provided in the income share agreement if the consumer does not provide contractually obligated documentation of income.

(c) Notwithstanding subsection (a), an income share agreement may contain a provision that allows a consumer to terminate his or her income share agreement before the events terminating further obligations under the income share agreement. The early termination mechanisms, such as total caps on payments due to the licensee or other rights to partially or fully terminate further obligations under the income share agreement, must be optional to the consumer and within the consumer's control. In such circumstances, such mechanisms will not be deemed a form of acceleration, early termination penalty, or prepayment penalty.

Section 130. No assignment of wages.

(a) A licensee may not take an assignment of earnings of the consumer for payment or as security for payment of a debt arising out of an income share agreement. An assignment of earnings in violation of this Section is unenforceable by the assignee of the earnings and revocable by the consumer. This Section does not prohibit a consumer from authorizing deductions from his or her earnings in favor of a licensee if the authorization is revocable, the consumer is given a complete copy of the writing evidencing the authorization at the time the consumer signs it, and the writing contains on its face a conspicuous notice of the consumer's right to revoke the authorization.

(b) A sale of unpaid earnings made in consideration of the payment of money to or for the account of the seller of the earnings is deemed to be a loan to the seller secured by an assignment of earnings.

Section 135. Limitations on garnishment.

(a) Before entry of judgment in an action against a consumer for a payment arising from an income share agreement, a licensee may not attach unpaid earnings of the consumer by garnishment or like proceedings.

(b) The maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment to enforce payment of a judgment arising from an income share agreement may not exceed the lesser of:

(1) 25% of the individual's disposable earnings for that week; or

(2) the amount by which the individual's disposable earnings for that week exceed 40 times the federal minimum hourly wage prescribed by Section 6(a)(1) of the Fair Labor Standards Act of 1938, 29 U.S.C. 206(a)(1), in effect at the time the earnings are payable.

In case of earnings for a pay period other than a week, the Department shall prescribe by rule a multiple of the federal minimum hourly wage equivalent to the amount set forth in paragraph (2).

(c) No court may make, execute, or enforce an order or process in violation of this Section.

(d) At any time after entry of a judgment in favor of a licensee in an action against a consumer for a payment arising from an income share agreement, the consumer may file with the court a verified application for an order exempting from garnishment pursuant to that judgment, for an appropriate period of time, a greater portion or all of the consumer's aggregate disposable earnings for a workweek or other applicable pay period than is provided for in subsection (b). The consumer shall in the application designate the portion of earnings not exempt from garnishment under this Section and other law, designate the period of time for which the additional exemption is sought, describe the judgment with respect to which the application is made, and state that the designated portion as well as his or her earnings that are exempt by law are necessary for the maintenance of the consumer or a family supported wholly or partly by the earnings. Upon filing a sufficient application under this subsection, the court may issue any temporary order necessary under the circumstances to stay enforcement of the judgment by garnishment, shall set a hearing on the application not less than 5 nor more than 10 days after the date of filing of the application, and shall cause notice of the application and the hearing date to be served on the judgment creditor or the creditor's attorney of record. At the hearing, if it appears to the court that all or any portion of the earnings sought to be additionally exempt are necessary for the maintenance of the consumer or a family supported wholly or partly by the earnings of the consumer for all or any part of the time requested in the application, the court shall issue an order granting the application to that extent; otherwise it shall deny the application. The order is subject to modification or vacation upon further application of any party to it upon a showing of changed circumstances after a hearing upon notice to all interested parties.

(e) An employer may not discharge an employee because a licensee has subjected or attempted to subject unpaid earnings of the employee to garnishment or like proceedings directed to the employer for the purpose of paying a judgment arising from an income share agreement.

Section 140. Use of multiple agreements. A licensee may not use multiple agreements with respect to a single income share agreement with intent to violate any limitations of this Act.

Section 145. Required disclosures.

(a) A licensee shall disclose the following information to each consumer, clearly and conspicuously, in a form that the consumer can keep at the time the transaction is consummated:

(1) The date of the contract.

(2) The dollar amount of the amount financed.

(3) The ISA percentage, expressed as a percentage, and an explanation of whether the ISA percentage is fixed or will vary; and any limitation on the ISA percentage adjustments or lack of limitations if the ISA percentage will change after consummation of the income share agreement. The ISA percentage shall be rounded to the nearest one-hundredth of 1% if the ISA percentage is not a whole number.

(4) The maximum number of payments expressed as a whole number.

(5) The maximum duration expressed as a whole number of the period of time.

(6) The income threshold expressed as a dollar amount and a statement that payments will only be required during periods when the consumer's income is equal to or exceeds the income threshold.

(7) An itemization of the amount financed; if the ISA provider is a seller of goods or services, then the amount of any down payment and any additional fees or costs shall be itemized.

(8) The definition of income to be used for the purposes of calculating the consumer's obligations under the income share agreement.

(9) A description of the terms under which the obligations of the consumer under the income share agreement will be extinguished before the full ISA duration.

(10) A payment schedule that shows the date on which the first payment will be due and reflecting each date thereafter during the ISA duration that a payment may be due.

(11) An itemization of any permissible fees associated with the ISA.

(12) A description of the methods used by the ISA provider to engage in a process of reconciliation and verification to determine if the consumer's payments are more than, equal to, or less than the payments owed by the consumer under his or her income share agreement; this description shall include the following:

(i) a description of the frequency or triggers for the commencement of the income verification process;

(ii) a description of the requirements and timing of the process in which the consumer must participate in order for the ISA provider to verify the consumer's income; and

(iii) a description of any records or forms, including tax records, that the consumer may be required to execute or submit.

(13) The name and address of the ISA provider.

(14) A table displaying the dollar amounts of each payment, the number of payments, the effective annual percentage rate, and the sum total of all payments that a consumer would be required to pay under the income share agreement at a range of annual income levels based on the ISA duration. The comparison table shall include a statement that "This Comparison Table is for illustrative purposes only and may not reflect the amounts that you are likely to pay under this income share agreement. This table assumes you have the same income over the entire term of your income share agreement. It does not take into account changes in income. Your income will likely change over time. This table does not represent the income or range of incomes that you are likely to earn in the future.". In computing the APR, the ISA provider shall use the amount financed and may assume that the income share agreement will be disbursed in the amount and with the disbursement schedule that it reasonably expects to follow for such income share agreement and that payments would commence on the date set forth in the income share agreement. The income used in this disclosure shall include, at minimum, the obligations at the following incomes:

(i) no income;

(ii) income equal to the annual equivalent of the income threshold;

(iii) various income scenarios with at least calculations at annual incomes of $40,000, $60,000, $80,000, $100,000, $125,000, $150,000, $175,000, and $200,000; and

(iv) if known by the ISA provider, the consumer's current income.

(15) A statement that the income share agreement is not a fixed payment installment loan and that the amount the consumer will be required to pay under the income share agreement:

(i) may be more or less than the amount financed by the ISA provider; and

(ii) will vary in proportion with the consumer's income.

(b) The disclosures required by this Section shall be grouped together and segregated from all other information.

(c) The disclosures required by this Section may be provided to a consumer in electronic form, subject to compliance with the consumer's consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 7001 et seq., and applicable State law.

(d) If model documents are established pursuant to any federal law covering income share agreements, compliance with those forms shall be considered compliance with this Act with respect to the disclosure requirements contained in this Act.

Section 150. Early completion. An income share agreement shall specify the terms and conditions by which the consumer may extinguish his or her obligations under the income share agreement before the end of the income share agreement's duration. An income share agreement may include any method to determine the early completion payment; however, a consumer may always cancel an income share agreement by making aggregate payments, excluding payments to fees, equal to the ISA payment cap. The consumer is entitled to this early completion regardless of whether the consumer makes this early completion payment by making regularly scheduled payments or by making a single lump sum payment in the amount of the early completion payment.

Section 155. Assumption of increase in future income.

(a) If a consumer fails to provide income documentation as reasonably required by an income share agreement, a licensee may assign an amount of income to the consumer and compute the consumer's monthly payment amount by any of the following methods, to the extent disclosed in the income share agreement:

(1) assigning an income amount obtained from a reasonably reliable third party or a credit reporting agency;

(2) if the consumer previously provided income documentation or has had an income assigned in the prior 12-month period that has increased by an amount not to exceed 10%, but such increase may not be applied more than once per 12-month period;

(3) contacting the consumer's employer, or any person or entity reasonably believed to represent the consumer's employer, to obtain, verify, or update the consumer's income information;

(4) contacting the Department of Revenue or the Internal Revenue Service to obtain the most recent information available about the student's income; or

(5) for licensees providing educational income share agreements, assigning a reasonable qualified income based on the incomes of:

(A) the nearest reasonably relevant quantile of income for individuals working in the profession for which the consumer's educational program was intended to prepare the participant, as determined by information published by the Bureau of Labor Statistics or other reasonably reliable publicly available data sources; or

(B) the nearest reasonably relevant quantile of income of consumers who attended the same or a reasonably comparable covered educational program or course of study, as determined by information published by the Bureau of Labor Statistics or other reasonably reliable publicly available data sources.

(b) If a licensee assigns an income to a consumer's income share agreement, it shall:

(1) notify the consumer in the monthly billing statement, and in each billing statement thereafter while the assigned income remains applicable to the consumer's income share agreement, that income has been assigned and of the consumer's rights under this Section;

(2) if the consumer does provide income information as reasonably required by the income share agreement within one year of the date on which the licensee notified the consumer that assigned income will be applied to the income share agreement, then, within 15 days after the licensee's receipt of such information, the licensee shall update each prior instance in which assigned income was applied using the income information provided by the consumer; and

(3) if the consumer provides income information more than one year after the licensee first assigned income to the consumer's income share agreement, then the licensee may, but is not obligated to, update each prior instance in which assigned income was applied using the income information provided by the consumer.

(c) A licensee that assigns income to an income share agreement shall retain all applicable records relating to the method and data sources used to make such estimation for 3 years after the end of that income share agreement.

Section 160. Receipts; statements of account; evidence of payment.

(a) The licensee shall deliver or mail to the consumer, without request, a written receipt for each payment made pursuant to an income share agreement. A periodic statement showing a payment received by mail complies with this subsection.

(b) Upon written request of a consumer, the licensee shall provide a written statement of the dates and amounts of payments made within the 12 months preceding the month in which the request is received. The statement shall be provided without charge once during each year of the term of the obligation. If additional statements are requested, the licensee may charge an amount not to exceed $5.00 for each additional statement.

(c) After a consumer has fulfilled all obligations with respect to an income share agreement, the licensee, upon request of the consumer, shall deliver or mail to the consumer written evidence acknowledging termination of all obligations with respect to the income share agreement.

Section 165. Advertising. A licensee may not advertise, print, display, publish, distribute, broadcast, or cause to be advertised, printed, displayed, published, distributed, or broadcast in any manner any statement or representation that is false, deceptive, or misleading.

Section 170. Penalties.

(a) A person who engages in business as a licensee without the license required by this Act commits a Class 4 felony.

(b) The consumer, before the expiration of 2 years after the date of his or her last scheduled payment, may recover such reasonable attorney's fees and court costs as a court may assess. A bona fide error by a licensee in calculating charges, fees, or rebates is not a violation if the licensee corrects the error within a reasonable time after discovery.

(c) No provision of this Section imposing any liability shall apply to any act done or omitted in conformity with any rule or written interpretation of a rule by the Division of Financial Institutions of the Department of Financial and Professional Regulation, notwithstanding that after such act or omission has occurred, such rule or interpretation is amended, rescinded, or determined by judicial or other authority to be invalid for any reason. All interpretations must be written and signed by the Department's chief counsel and approved by the Director.

(d) Notwithstanding any other provision of this Section, if any person who does not have a license issued under this Act makes an income share agreement to an Illinois consumer, then the loan shall be null and void and the person who made the income share agreement shall have no right to collect, receive, or retain any amounts related to the income share agreement.

Section 175. Cease and desist.

(a) The Director may issue a cease and desist order to any licensee or another person doing business without a required license, when in the opinion of the Director, the licensee or the other person is violating or is about to violate any provision of this Act or any rule or requirement imposed in writing by the Department as a condition of granting any authorization permitted by this Act.

(b) The Director may issue a cease and desist order before a hearing.

(c) The Director shall serve notice of his or her action, designated as a cease and desist order made pursuant to this Section, including a statement of the reasons for the action, either personally or by certified mail, return receipt requested. Service by certified mail shall be deemed completed when the notice is deposited in the U.S. mail.

(d) Within 15 days after service of the cease and desist order, the licensee or the other person may request, in writing, a hearing.

(e) The Director shall schedule a hearing within 30 days after the request for a hearing unless otherwise agreed to by the parties.

(f) The cost for the administrative hearing shall be set by rule.

(g) If it is determined that the Director had the authority to issue the cease and desist order, he or she may issue such orders as may be reasonably necessary to correct, eliminate, or remedy such conduct.

(h) The powers vested in the Director by this Section are additional to all other powers and remedies vested in the Director by law, and nothing in this Section shall be construed as requiring that the Director employ the power conferred in this Section instead of or as a condition precedent to the exercise of any other power or remedy vested in the Director.

(i) The Department shall have the authority to adopt rules for the administration of this Section.

Section 180. Civil action. A claim of violation of this Act may be asserted in a civil action.

Section 185. Application of Act.

(a) This Act does not apply to any person, partnership, association, limited liability company, or corporation doing business under and as permitted by any law of this State or the United States relating to banks, savings and loan associations, savings banks, or credit unions. This Act does not apply to any income share agreements or the like made with business or commercial entities.

(b) During the first 90 days after the effective date of this Act, any person who has applied for a license under this Act or filed written notice of intention to apply for a license with the Director and whose application has not been denied, shall be subject to all provisions of this Act and may make income share agreements as if he or she were a licensee under this Act.

(c) This Act shall not apply to any contractor transaction made before the effective date of this Act.

Section 190. Rules. The Department may adopt and enforce such reasonable rules, directions, orders, decisions, and findings as the execution and enforcement of the provisions of this Act require and that are not inconsistent with this Act. In addition, the Department may adopt rules in connection with the activities of licensees that are necessary and appropriate for the protection of consumers in this State. All rules and directions of a general character shall be sent electronically to all licensees.

Section 195. Judicial review. All final administrative decisions of the Department under this Act shall be subject to judicial review pursuant to the provisions of the Administrative Review Law and any rules adopted pursuant to the Administrative Review Law.

Section 200. Injunction; civil penalties; costs. If it appears to the Director that a person or any entity has committed or is about to commit a violation of this Act, a rule adopted under this Act, or an order of the Director, the Director may apply to the circuit court for an order enjoining the person or entity from violating or continuing to violate this Act, the rule, or order and for injunctive or other relief that the nature of the case may require and may, in addition, request the court to assess a civil penalty up to $1,000 along with costs and attorney's fees.

Section 205. Adjustment of dollar amounts.

(a) From time to time the dollar amounts in this Act designated as subject to change shall change, as provided in this Section, according to and to the extent of changes in the index.

(b) The index for December of the year preceding the year in which this Act becomes effective is the reference base index.

(c) The designated dollar amounts shall change on July 1 of each even-numbered year if the percentage of change, calculated to the nearest whole percentage point, between the index and the end of the preceding year and the reference base index is 10% or more, but:

(1) the portion of the percentage change in the index in excess of a multiple of 10% shall be disregarded and the dollar amounts shall change only in multiples of 10% of the amounts provided in this Act on the date of enactment; and

(2) the dollar amounts shall not change if the amounts required by this Section are those currently in effect pursuant to this Act as a result of earlier application of this Section.

(d) If the index is revised, the percentage of change pursuant to this Section shall be calculated on the basis of the revised index. If a revision of the index changes the reference base index, a revised reference base index shall be determined by multiplying the reference base index then applicable by the rebasing factor furnished by the Bureau of Labor Statistics. If the index is superseded, the index referred to in this Section is the one represented by the Bureau of Labor Statistics as reflecting most accurately changes in the purchasing power of the dollar for consumers.

(e) The Department shall adopt a rule setting forth, on or before April 30 of each year in which dollar amounts are to change, the changes in dollar amounts required by this Section. As soon as practical after the changes occur, the Department shall adopt a rule setting forth the changes in the index required by subsection (d), including, if applicable, the numerical equivalent of the reference base index under a revised reference base index and the designation or title of any index superseding the index.

(f) A person does not violate this Act with respect to a transaction otherwise complying with this Act if he or she relies on dollar amounts either determined according to subsection (c) or appearing in the last rule of the Department announcing the then-current dollar amounts.

Section 210. Construction against implicit authority. This Act is a general act intended as a unified coverage of its subject matter; no part of this Act shall be construed to be impliedly repealed by subsequent legislation if that construction can reasonably be avoided.

Section 215. Application of other Acts. Income share agreements and licensees are subject to the Know Before You Owe Private Education Loan Act and the Predatory Loan Prevention Act and shall comply with their requirements and any rules adopted by the Department of Financial and Professional Regulation pursuant to those Acts.

Section 220. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 999. Effective date. This Act takes effect upon becoming law.".