093_HB2458

 
                                     LRB093 03676 JLS 11081 b

 1        AN ACT concerning deferred deposit lending practices.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 5.  The Consumer Installment Loan act is  amended
 5    by  changing  Section 15d and adding Sections 1.5, 8.2, 17.1,
 6    17.2, 17.3, 17.4, 17.5, and 22.1 as follows:

 7        (205 ILCS 670/1.5 new)
 8        Sec. 1.5.  Definitions.
 9        "Deferred deposit loan" means a loan upon which  interest
10    is  charged  at  an  annual  percentage  rate  exceeding  36%
11    pursuant  to  a  written agreement between a licensee and the
12    maker of a check whereby at commencement the licensee accepts
13    a post dated check from the maker dated on the date the  loan
14    is due.
15        "Deferred deposit lender" means the following:
16             (1)  Any  person  who  offers  or  makes  a deferred
17        deposit loan, who arranges a deferred deposit loan for  a
18        third  party,  or who acts as an agent for a third party,
19        regardless of whether the  third  party  is  exempt  from
20        licensing under this Act or whether approval, acceptance,
21        or ratification by the third party is necessary to create
22        a legal obligation for the third party.
23             (2)  Notwithstanding   the  foregoing,  a  state  or
24        federally chartered bank, saving  and  loan  association,
25        credit   union,   or   supervised  lender  shall  not  be
26        considered a deferred deposit lender for purposes of this
27        Act and shall be specifically exempt from the  provisions
28        of  this  Act  so  long  as  all  of  the  following  are
29        satisfied:
30                  (A)  it initially advances the loan proceeds to
31             the customer;
 
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 1                  (B)  it  does  not sell, assign, or transfer in
 2             the aggregate a preponderant  economic  interest  in
 3             the  deferred  deposit transactions to the arranger,
 4             agent, or assistant or an affiliate or subsidiary of
 5             the state or federally chartered  bank,  saving  and
 6             loan   association,   credit  union,  or  supervised
 7             lender, unless selling, assigning, or transferring a
 8             preponderant economic interest is permitted  by  the
 9             primary   regulator   of   the  state  or  federally
10             chartered bank, saving and loan association,  credit
11             union, or supervised lender; and
12                  (C)  it  develops  the  deferred  deposit  loan
13             program on its own.
14             (3)  If  a  deferred  deposit  lender, as defined in
15        item (1) of this provision, offers, arranges, acts as  an
16        agent  for,  or  assists  a  state or federally chartered
17        bank, saving  and  loan  association,  credit  union,  or
18        supervised  lender in any way in the making of a deferred
19        deposit loan and the state or federally  chartered  bank,
20        saving  and loan association, credit union, or supervised
21        lender meets the standards set for the  in  item  (2)  of
22        this  provision, the deferred deposit lender shall comply
23        with all other requirements of this  Act  to  the  extent
24        they are not preempted by other state or federal laws.
25        "Interest  bearing  loan"  means a loan in which interest
26    is charged upon the principal amount borrowed.
27        "Simple interest" means that the interest on all deferred
28    deposit loans is computed as simple interest as defined in 38
29    Ill. Adm. Code 110.80.
30        "Check"  means  a  personal  check,   draft,   or   other
31    negotiable  instrument signed by the obligor and made payable
32    to a licensee and includes the  electronic  equivalent  of  a
33    check including, but not limited to, automatic clearing house
34    transactions.
 
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 1        "Renew"  means  to  enter  into  a  deferred deposit loan
 2    within 7 days  after  the  termination  of  a  previous  loan
 3    between   the  consumer  and  the  deferred  deposit  lender,
 4    including the extension of an existing  loan  with  only  the
 5    payment  of  the  fee.  If the previous deferred deposit loan
 6    principal is paid in full, the  renewed  loan  may  be  in  a
 7    principal  amount  allowed  under  this  Act. If the previous
 8    deferred deposit loan principal  is  not  paid  in  full,  as
 9    permitted  under  subsection (b) of Section 17.1, the renewed
10    loan may be in a principal amount not to exceed the amount of
11    the unpaid principal of the previous loan.

12        (205 ILCS 670/8.2 new)
13        Sec. 8.2.  Availability of debt management services.
14        (a)  Before  entering  into  a  deferred   deposit   loan
15    agreement,  a  licensee  must give to the obligor a pamphlet,
16    approved by the Director, describing the availability of debt
17    management   services   and   the   obligor's   rights    and
18    responsibilities in the transaction.
19        (b)  Each deferred deposit loan agreement and refinancing
20    agreement  executed  by a licensee shall include a statement,
21    which shall be conspicuous and  in  close  proximity  to  the
22    signature  of  the obligor, as follows: "I have received from
23    (name of lender) a toll free number from  the  Department  of
24    Financial  Institutions  that  I  can  call  for  information
25    regarding debt management services.".
26        (c)  At  the  time  a deferred deposit lender conveys any
27    written notice to an obligor indicating  the  obligor  is  in
28    arrears  or  that the obligor is in default, the lender shall
29    include with the notice a statement indicating  a  toll  free
30    number  of  the Department of Financial Institutions that the
31    obligor may contact for the purpose of the obligor  receiving
32    information  from  the  Department  regarding debt management
33    services. The form and method of  providing  the  information
 
                            -4-      LRB093 03676 JLS 11081 b
 1    shall be subject to approval of the Department.

 2        (205 ILCS 670/15d) (from Ch. 17, par. 5419)
 3        Sec.   15d.  Extra  charges  prohibited;  exceptions.  No
 4    amount in addition to the  charges  authorized  by  this  Act
 5    shall  be  directly or indirectly charged, contracted for, or
 6    received, except (1) lawful fees paid to any  public  officer
 7    or  agency to record, file or release security; (2) (i) costs
 8    and disbursements actually incurred in connection with a real
 9    estate loan, for  any  title  insurance,  title  examination,
10    abstract of title, survey, or appraisal, or paid to a trustee
11    in  connection with a trust deed, and (ii) in connection with
12    a real estate loan those charges authorized by  Section  4.1a
13    of  the  Interest  Act, whether called "points" or otherwise,
14    which charges are imposed as a condition for making the  loan
15    and  are  not  refundable  in  the event of prepayment of the
16    loan;  (3)  costs  and  disbursements,  including  reasonable
17    attorney's fees, incurred in legal proceedings to  collect  a
18    loan or to realize on a security after default; (4) an amount
19    not  exceeding  $25,  plus  any  actual  expenses incurred in
20    connection with a check or draft that is not honored  because
21    of  insufficient  or  uncollected  funds  or  because no such
22    account exists, provided, that in connection with a  deferred
23    deposit loan, the amount authorized under this item (4) shall
24    not  exceed $20 plus any actual expenses so incurred; and (5)
25    a document preparation fee not to exceed  $25  for  obtaining
26    and   reviewing  credit  reports  and  preparation  of  other
27    documents; and (6) a deferred deposit loan  delinquency  fee,
28    if provided for in the written agreement between licensee and
29    obligor,  not  to  exceed  $5  for a deferred deposit loan in
30    default in any amount for a period not  less  than  10  days,
31    which  may  be  assessed  once  on any loan regardless of the
32    period during which it remains in default. A deferred deposit
33    lender may not contract for or collect attorney's  fees  from
 
                            -5-      LRB093 03676 JLS 11081 b
 1    obligors on legal actions arising from deferred deposit loans
 2    made  under  this  Act,  unless  the legal action against the
 3    obligor is based upon  fraud,  nor  may  a  deferred  deposit
 4    lender use or threaten to use the criminal process to collect
 5    a  deferred  deposit loan. This Section does not prohibit the
 6    receipt of a commission, dividend, charge, or  other  benefit
 7    by the licensee or by an employee, affiliate, or associate of
 8    the licensee from the insurance permitted by Sections 15a and
 9    15b  of  this  Act  or from insurance in lieu of perfecting a
10    security  interest  provided  that  the  premiums  for   such
11    insurance  do  not  exceed  the  fees that otherwise could be
12    contracted for by the licensee under this Section.  Obtaining
13    any of the items referred to in clause (i) of  item  (2)   of
14    this   Section  through  the  licensee  or  from  any  person
15    specified by the licensee shall not be a condition  precedent
16    to the granting of the loan.
17    (Source: P.A. 89-400, eff. 8-20-95; 90-437, eff. 1-1-98.)

18        (205 ILCS 670/17.1 new)
19        Sec. 17.1 Deferred deposit loan terms.
20        (a)  A  deferred  deposit  loan  may  not  exceed $400 in
21    principal amount. However, no loan  shall  be  made  in  such
22    amount  that  the  principal  and  interest  payments for the
23    stated duration of the loan exceed 50% of the obligor's gross
24    income for that period.
25        (b)  An obligor may renew a  deferred  deposit  loan  one
26    time after the original loan.
27        An  obligor  may  renew  a deferred deposit loan a second
28    time if he repays at  least  25%  of  the  principal  of  the
29    previous loan.
30        An obligor may renew a deferred deposit loan a third time
31    if  he  repays  at least 50% of the principal of the previous
32    loan.
33        An obligor may renew a deferred deposit loan more than  3
 
                            -6-      LRB093 03676 JLS 11081 b
 1    times if:
 2             (1)  he  repays the entire principal of the previous
 3        loan; and
 4             (2)  he is provided the opportunity to  convert  the
 5        term  of  the  loan  to  the  Mandatory  Payment Plan, as
 6        provided in subsection (c).
 7        (c)  A lender must provide the obligor written notice  of
 8    the  obligor's  right  to  request a repayment plan under the
 9    conditions established in this subsection. The  form  of  the
10    written  notice shall be either prescribed or approved by the
11    Department and shall be set forth conspicuously both  at  the
12    point-of-sale and in every deferred deposit loan agreement.
13        If  an  obligor  renews  a deferred deposit loan a fourth
14    time,  that  fourth  renewed  loan  and  each  renewed   loan
15    thereafter  is  subject  to  a mandatory prepayment plan that
16    allows the obligor to repay the renewed loan on the following
17    terms:
18             (1)  the obligor must request the repayment plan, in
19        writing, not later than 24 hours prior to the due date of
20        the deferred deposit loan;
21             (2)  the obligor  shall  be  allowed  to  repay  the
22        deferred  deposit  loan  in 4 equal installments with one
23        installment due on each of the obligor's next 4 pay dates
24        (with at least 13 days between installments);
25             (3)  the obligor shall pay a fee not to  exceed  $15
26        for electing the payment plan; and
27             (4)  the  obligor  shall agree not to enter into any
28        additional deferred deposit loan during the payment  plan
29        term  or for a period of 14 days after termination of the
30        payment plan term.
31        (d)  The post-dated check used as security for a deferred
32    deposit loan must name the lender as payee.
33        (e)  The loan agreement for a deferred deposit loan  must
34    include  a separate statement signed by the obligor attesting
 
                            -7-      LRB093 03676 JLS 11081 b
 1    that the obligor is not  barred  from  obtaining  a  deferred
 2    deposit  loan  under the requirements of this Act. The lender
 3    shall further verify the statement by means of  any  database
 4    created  by  or  approved  by  the  Department  of  Financial
 5    Institutions that purpose.
 6        (f)  The  loan  agreement  shall  advise the obligor that
 7    matters involving improprieties in the making of the loan  or
 8    in   loan   collection  practices  may  be  referred  to  the
 9    Department and shall prominently  disclose  the  Department's
10    address and telephone number.
11        (g)  Each  deferred  deposit  loan  refinancing agreement
12    executed by a licensee shall include a statement, which shall
13    be initialed by the obligor, as  follows:  "I  have  received
14    from  (name of lender) a toll free number from the Department
15    of Financial Institutions that I  can  call  for  information
16    regarding debt management services.".

17        (205 ILCS 670/17.2 new)
18        Sec.  17.2.  Deferred  deposit loan notifications. At the
19    time a deferred deposit lender conveys a second notice to  an
20    obligor  indicating  the obligor is in arrears or at the time
21    of any notice that the obligor is in default for a debt  owed
22    to  the  deferred  deposit lender, the licensee shall include
23    with the notice a statement indicating a telephone number  of
24    the Department of Financial Institutions that the obligor may
25    contact  for the purpose of the obligor receiving information
26    from the Department regarding debt  management  services  for
27    assisting  the  obligor.  The  form  and method of the notice
28    provided by the lender shall be subject to  approval  by  the
29    Director.

30        (205 ILCS 670/17.3 new)
31        Sec.  17.3.  Security interest. A deferred deposit lender
32    may not take a security interest  in  any  of  the  obligor's
 
                            -8-      LRB093 03676 JLS 11081 b
 1    property  other  than  the check as tendered to the lender at
 2    the time of the making of the loan.

 3        (205 ILCS 670/17.4 new)
 4        Sec. 17.4.  Deferred deposit loan  proceeds.  A  deferred
 5    deposit  lender must issue the proceeds of a deferred deposit
 6    loan in the form of a check  drawn  on  the  licensee's  bank
 7    account,  in  cash,  or by money order. When the proceeds are
 8    issued in the form of a check  drawn  on  the  lender's  bank
 9    account  or  by  money order, the lender may not charge a fee
10    for cashing the check or money order if cashing services  are
11    offered  at  the  location.  When  the proceeds are issued in
12    cash, the lender must provide  the  obligor  with  a  written
13    verification  of  the  cash  transaction and shall maintain a
14    record of the transaction.

15        (205 ILCS 670/17.5 new)
16        Sec. 17.5.  Right of rescission. An obligor may rescind a
17    deferred deposit loan agreement without cost  no  later  than
18    the  end of the business day immediately following the day on
19    which the deferred deposit loan  was  made.  To  rescind  the
20    deferred deposit loan, an obligor must inform the lender that
21    the  obligor  wants  to rescind the deferred deposit loan and
22    return the uncashed proceeds check or cash in an amount equal
23    to the amount loaned pursuant to the written agreement.

24        (205 ILCS 670/22.1 new)
25        Sec.  22.1.  Preemption  of  administrative  rules.   The
26    provisions  of  this  Act  that  are  applicable  to deferred
27    deposit lenders, including Sections 1.5, 2.5, 8.2, 15d, 17.1,
28    17.2, 17.3, 17.4, and 17.5, preempt  the  provisions  of  the
29    Illinois  Administrative Code that are applicable to deferred
30    deposit lenders providing deferred deposit  loans,  including
31    38   Ill.  Adm.  Code  110.300,  110.310,  110.320,  110.330,
 
                            -9-      LRB093 03676 JLS 11081 b
 1    110.360, 110.370, 110.380, 110.390, 110.400, and 110.410.

 2        Section 15.  The Criminal Code  of  1961  is  amended  by
 3    changing Section 17-1a as follows:

 4        (720 ILCS 5/17-1a) (from Ch. 38, par. 17-1a)
 5        Sec.  17-1a.  Civil liability for deceptive practices.  A
 6    person who issues a check or order to a payee in violation of
 7    Section 17-1(B) (d) and who fails to pay the  amount  of  the
 8    check  or  order to the payee within 30 days following either
 9    delivery and acceptance by the addressee of a written  demand
10    by  both  certified  mail  and  by  first  class  mail to the
11    person's last  know  address;  or  attempted  delivery  of  a
12    written demand sent by both certified mail and by first class
13    mail  to  the  person's  last known address and the demand by
14    certified mail is returned to the sender with a notation that
15    delivery was refused or unclaimed, shall  be  liable  to  the
16    payee  or a person subrogated to the rights of the payee for,
17    in addition to the amount owing upon  such  check  or  order,
18    damages  of  treble  the amount so owing, but in no case less
19    than $100 nor more than $1,500, plus attorney fees and  court
20    costs,  provided that a deferred deposit lender, as that term
21    is defined in Section 1.5 of the  Consumer  Installment  Loan
22    Act, shall not be entitled to collect damages of treble on an
23    amount owing from a deferred deposit loan.
24        A  cause  of  action under this Section may be brought in
25    small claims court or in any  other  appropriate  court.   As
26    part  of  the  written  demand  required by this Section, the
27    plaintiff shall provide written notice to  the  defendant  of
28    the  fact  that prior to the hearing of any action under this
29    Section, the defendant may tender to the  plaintiff  and  the
30    plaintiff  shall  accept  as  satisfaction  of  the claim, an
31    amount of money equal to the sum of the amount of  the  check
32    and the incurred court costs, and service and attorney fees.
 
                            -10-     LRB093 03676 JLS 11081 b
 1    (Source:  P.A.  89-378,  eff.  8-18-95;  90-227, eff. 1-1-98;
 2    90-721, eff. 1-1-99.)

 3        Section 97.  Severability. The provisions of this Act are
 4    severable under Section 1.31 of the Statute on Statutes.

 5        Section 99.  Effective date. This  Act  takes  effect  on
 6    October 1, 2003.