HB0600 94TH GENERAL ASSEMBLY

LRB094 06800 MKM 36902 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0600

Introduced 1/27/2005, by Rep. James H. Meyer

SYNOPSIS AS INTRODUCED:

New Act
20 ILCS 1205/8	from Ch. 17, par. 109
815 ILCS 505/2E	from Ch. 121 1/2, par. 262E

Creates the Short-term Loan Act. Provides for the regulation of entities that make payday loans and motor vehicle title loans having a term of fewer than 93 days and in an amount that does not exceed $1,000. Limits charges that may be imposed in connection with the loans. Requires lenders to obtain a license from the Director of the Division of Financial Institutions in the Department of Financial and Professional Regulation. Amends the Financial Institutions Code to require the Director of the Division of Financial Institutions to establish a complaint registry regarding licensees under the Short-term Loan Act. Amends the Consumer Fraud and Deceptive Business Practices Act to provide that 3 or more violations of the Short-term Loan Act constitute a violation of the Consumer Fraud and Deceptive Business Practices Act. Effective January 1, 2006.

CORRECTIONAL BUDGET AND IMPACT NOTE ACT MAY APPLY

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning regulation.

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

Section 1. Short title. This Act may be cited as the Short-term Loan Act.

Section 5. Definitions.

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

"Motor vehicle title loan firm" means any business that loans money to a borrower in a transaction in which the borrower turns over custody of a title to a motor vehicle as security for the loan.

"Net worth" means total assets minus total liabilities.

"Payday loan firm" means any business that loans money to a borrower in a transaction in which the loan is due and payable upon the next payday of the borrower or any member of the borrower's immediate family.

Section 10. License required to engage in business. No person, partnership, association, limited liability company, or corporation shall engage in the business of making loans of money for terms of 92 days or less except as authorized by this Act after first obtaining a license from the Director.

Section 15. Application; fees. Application for a license shall be in writing, under oath, and in the form prescribed by the Director. The applicant, at the time of making the application, shall pay to the Director an application fee and annual license fee to be fixed by the Director by rule. The application fee and the annual license fee shall in no case be less than the amounts determined by the Director to be necessary to cover his or her duties prescribed by this Act, including the cost of maintaining and operating a consumer complaint system.

Section 20. Positive net worth; bond. Before a license is granted, the applicant shall prove in form satisfactory to the Director that the applicant has a positive net worth of a minimum of $50,000. An applicant shall maintain a surety bond in the principal sum of $5,000 issued by a bonding company authorized to do business in this State and which shall be approved by the Director. This bond shall run to the Director and shall be for the benefit of any person who incurs damages as a result of the actions of a licensee and who is lawfully awarded these damages pursuant to an appropriate court order. If the Director finds at any time that a bond is of insufficient size or otherwise doubtful, an additional bond in any amount determined by the Director shall be filed by the licensee within 30 days after written demand by the Director.

Section 25. Appointment of attorney-in-fact for service of process. A licensee shall appoint, in writing, the Director as attorney-in-fact upon whom all lawful process against the licensee may be served with the same legal force and validity as if served on the licensee. A copy of the written appointment, duly certified, shall be filed in the office of the Director, and a copy thereof certified by the Director 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 the licensee, the Director shall immediately notify the licensee by registered mail, enclosing the summons and specifying the hour and day of service.

Section 30. Investigation to determine whether license shall be issued. Upon the filing of an application and the payment of the required fees, the Director shall investigate to determine (i) that the reputation of the applicant, including managers, partners, owners, officers, or directors of a limited liability company, is such as to warrant belief that the business will be operated honestly and fairly within the purposes of this Act and (ii) that the applicant meets the positive net worth requirement set forth in Section 20 of this Act. Unless the Director finds that the application meets both of these criteria, the Director shall not issue a license, shall notify the applicant of the denial, and shall return to the applicant the sum paid by the applicant as an annual license fee, but shall retain the application fee. The Director shall approve or deny every application for licensure under this Act within 60 days from the filing of the application and submission of the required fees.

Section 35. License; consumer information to be posted.

(a) The license shall state the address, including 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.

(b) In addition to posting the license, the licensee shall legibly post in each of his or her offices where business is done with the public, in a format to be determined by the Director by rule, the name, address, and telephone number of a short-term consumer lending customer complaint gathering service or hotline that the Director shall use to gather information about each licensee and take appropriate action.

Section 40. More than one license to same licensee. 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 an original issuance of a license.

Section 45. Changing place of business. Whenever a licensee changes his or her place of business to a location other than that set forth in his or her license, the licensee shall give written notice of the change to the Director at least 10 days prior to the relocation. However, if the new location is more than 15 miles from the previous location, the licensee shall obtain written approval from the Director prior to the relocation.

Section 50. Annual license fee. A licensee shall, on or before December 15 of each year, pay to the Director the annual license fee required by Section 15 of this Act for the next succeeding calendar year. The license shall expire on January 1 unless the license fee has been timely paid to renew the license.

Section 55. Expenses. In addition to the licensee fee, the licensee shall bear the reasonable expense of any examination, investigation, or custody by the Director under any provisions of this Act.

Section 60. License expirations and reinstatements. If a licensee fails to renew a license by December 31 of any year, the license shall automatically expire and the licensee is not entitled to a hearing. The Director, at 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 65. Deposits. All moneys received by the Director under this Act shall be deposited in the Financial Institution Fund created under Section 6z-26 of the State Finance Act.

Section 70. Fines, suspension, or revocation of license.

(a) The Director may, after 10 days notice by registered mail to the licensee at the address set forth in the license, stating the contemplated action and the general grounds for that action, fine the licensee an amount not exceeding $10,000 per violation, or revoke or suspend any license issued under this Act, if the Director finds that:

(1) the licensee has failed to comply with any provision of this Act or any order, decision, finding, rule, or direction of the Director lawfully made pursuant to the authority of this Act; or

(2) any fact or condition exists which, if it had existed at the time of the original application for the license, clearly would have warranted the Director in refusing to issue the license.

(b) The Director may fine, suspend, or revoke only the particular license with respect to the grounds for which the fine, revocation, or suspension occur or exist. If the Director finds that the grounds for the fine, suspension, or revocation are of general application to all offices or to more than one office of the licensee, the Director shall fine, suspend, or revoke every license to which those grounds apply.

(c) No revocation, suspension, or surrender of any license shall impair or affect the obligation of any pre-existing lawful contract between the licensee and any obligor.

(d) The Director may issue a new license to a licensee whose license has been revoked if the facts or conditions that warranted the Director's original refusal to issue the license no longer exist.

(e) In every case in which a license is suspended or revoked or an application for a license or renewal of a license is denied, the Director shall serve the licensee with notice of the suspension, revocation, or denial, including a statement of the reasons for the suspension, revocation, or denial, 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.

(f) An order assessing a fine, an order revoking or suspending a license, and an order denying renewal of a license shall take effect upon service of the order on the licensee, unless the licensee requests a hearing, in writing, within 10 days after the date of service. If a hearing is requested, the order shall be stayed until a final administrative order is entered.

(g) If the licensee requests a hearing, the Director shall schedule a hearing within 30 days after the request for a hearing unless the parties otherwise agree to a later date.

(h) The hearing shall be held at the time and place designated by the Director. The Director and any administrative law judge designated by the Director shall have the power to administer oaths and affirmations, subpoena witnesses and compel their attendance, take evidence, and require the production of books, papers, correspondence, and other records or information that he or she considers relevant or material to the inquiry.

(i) The costs for the administrative hearing shall be determined by the Director by rule.

(j) The Director shall have the authority to prescribe rules for the administration of this Section.

Section 75. Closing of business; surrender of license.

(a) At least 10 days prior to a licensee ceasing operations, closing business, or filing for bankruptcy, the licensee shall notify the Director of its action in writing, and, unless the licensee is filing for bankruptcy, the licensee shall 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 prior to the surrender or entitle the licensee to a return of any part of the annual license fee.

(b) The licensee shall notify the Director of the location where the books, accounts, contracts, and records will be maintained and of the procedure to ensure prompt return of contracts, titles, and releases to customers.

(c) 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.

(d) The Director 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 80. Investigation of conduct of business. For the purpose of discovering violations of this Act or securing information lawfully required under this Act, the Director may at any time investigate the loans and business and examine the books, accounts, records, and files of any licensee and of any person, partnership, association, limited liability company, or corporation engaged in the business described in Section 10 of this Act, whether the person, partnership, association, limited liability company, or corporation acts or claims to act as principal or agent or within or without the authority of this Act. For the purposes of this Section, the Director shall have free access to the offices and places of business and the books, accounts, papers, records, files, safes, and vaults of those persons, partnerships, associations, limited liability companies, and corporations. The Director may require the attendance of and examine under oath all persons whose testimony the Director may require relative to the loans or the business, and the Director shall have the power to administer oaths to all persons called as witnesses.

The Director shall make an examination of the affairs, business, office, and records of each licensee at least once each year. The Director shall establish by rule the fee to be charged for each examination day, including travel expenses for out-of-state licensed locations. The fee shall reasonably reflect actual costs. The Director shall also have authority to examine the books and records of any business made by a former licensee that is being liquidated, as the Director deems necessary, and may charge the examination fees otherwise required for licensees.

Section 85. Books and records. A licensee shall retain and use in its business or at another location approved by the Director any records required to enable the Director to determine whether the licensee is complying with the provisions of this Act and the rules promulgated under this Act. A licensee shall preserve the records of any loan for at least 2 years after making the final entry for the loan. Accounting systems maintained in whole or in part by mechanical or electronic data processing methods that provide information equivalent to information that is otherwise required and that follow generally accepted accounting principles are acceptable for that purpose if approved by the Director in writing.

Section 90. Reports. A licensee shall annually, on or before the first day of March, file a report with the Director giving any information that the Director may reasonably require concerning the business and operations during the preceding calendar year for each licensed place of business conducted by the licensee. The report shall be made under oath and in a form prescribed by the Director. Whenever a licensee operates 2 or more licensed offices or whenever 2 or more affiliated licensees operate licensed offices, a composite report of that group of licensed offices may be filed in lieu of individual reports. The Director may make and publish annually an analysis and recapitulation of the reports. The Director may fine each licensee $25 per day for each day after March 1 that the licensee fails to file the reports required under this Section.

Section 95. Other business; rules. Upon application by the licensee, the Director may approve the conduct of other business not specifically permitted by this Act in the licensee's place of business, unless the Director finds that the conduct of that business will conceal or facilitate evasion or violation of this Act. Any approval granted by the Director under this Section shall be in writing and shall describe the other businesses that may be conducted in the licensed office. The Director shall make and enforce reasonable rules for the conduct of business under this Section. The Director may investigate any business conducted in the licensed office to determine whether any evasion or violation of this Act has occurred.

Section 100. Prohibition against taking power of attorney.

No licensee shall take any power of attorney except to acknowledge the execution of an instrument or to confess judgement.

Section 105. Pledge or sale of note. No licensee or other person shall pledge, hypothecate, or sell a note entered into under the provisions of this Act by an obligor except to another licensee under this Act, a licensee under the Sales Finance Agency Act, a bank, a savings bank, a savings and loan association, or a 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 notes by licensees under this Act or other persons shall be made by agreement in writing and shall authorize the Director to examine the loan documents.

Section 110. Charges permitted.

(a) A licensee may lend to any borrower a principal amount not exceeding $1,000 for a period not exceeding 92 days and may charge, contract for, and receive interest thereon at a rate agreed upon by the licensee and the obligor, but in no case exceeding 24% per year. All transactions between licensees and their contractors on the one hand, and obligors on the other, shall be subject to the provisions of this Act. Nothing in this authorization shall permit the further lending by any licensee of any additional sum of money to any borrower in violation of Section 140 of this Act.

(b) For purpose of this Section, the following terms shall have the meanings ascribed herein:

"Applicable interest" for a precomputed loan contract means the amount of interest attributable to each monthly installment period. It is computed as if each installment period were one month and any interest charged for extending the first installment period beyond one month is ignored. The applicable interest for any monthly installment period is that portion of the precomputed interest that bears the same ratio to the total precomputed interest as the balances scheduled to be outstanding during that month bear to the sum of all scheduled monthly outstanding balances in the original contract.

"Interest-bearing loan" means a loan in which the debt is expressed as a principal amount plus interest charged on actual unpaid principal balances for the time actually outstanding.

"Precomputed loan" means a loan in which the debt is expressed as the sum of the original principal amount plus interest computed actuarially in advance, assuming all payments will be made when scheduled.

(c) Loans may be interest-bearing or precomputed. To compute time for either interest-bearing or precomputed loans for the calculation of interest and other purposes, a month shall be 1/12th of a year. A day shall be 1/365th of a year when calculation is made for a fraction of a month. When a period of time includes one or more whole months plus a fraction of a month, the licensee may charge interest for the fraction of the month at the rate of 1/365th of the agreed annual rate for each day actually elapsed.

(d) With respect to interest-bearing loans:

(1) Interest shall be computed on unpaid principal balances outstanding from time to time, for the time outstanding, until fully paid. Each payment shall be applied first to the accumulated interest and the remainder of the payment applied to the unpaid principal balance; provided, that, if the amount of the payment is insufficient to pay the accumulated interest, the unpaid interest continues to accumulate to be paid from the proceeds of subsequent payments and is not added to the principal balance.

(2) Interest shall not be payable in advance or compounded.

(3) Loans may be payable as agreed between the parties, including payment at irregular times or in unequal amounts and rates that may vary with an index that is independently verifiable and beyond the control of the licensee.

(4) The lender or creditor may, if the contract provides, collect a delinquency or collection charge on each installment in default for a period of not less than 10 days in an amount not exceeding 5% of the installment on installments in excess of $200 or $10 on installments of $200 or less, but only one delinquency and collection charge may be collected on any installment regardless of the period during which it remains in default.

(e) With respect to precomputed loans:

(1) Payments shall be applied in the order in which they become due.

(2) When any loan contract is paid in full before the due date, the licensee shall refund or credit the obligor with the total of the applicable interest for all fully unexpired days.

(3) The lender or creditor may, if the contract provides, collect a delinquency or collection charge on each installment in default for a period of not less than 10 days in an amount not exceeding 5% of the installment on installments in excess of $200 or $10 on installments of $200 or less, but only one delinquency or collection charge may be collected on any installment regardless of the period during which it remains in default.

(4) Fifteen days after the final installment as originally scheduled or deferred, the licensee may, upon giving notice to the obligor, convert a precomputed loan to an interest-bearing loan and compute and charge interest on that loan at any rate of interest previously agreed to by the parties to the loan.

Section 115. Credit insurance. Voluntary credit life insurance, credit accident and health insurance, involuntary unemployment insurance, credit property insurance, or other credit insurance policies approved or permitted by the Director of the Division of Insurance in the Department of Financial and Professional Regulation and any charge therefor which is deducted from the loan or paid by the obligor shall comply with the Illinois Insurance Code and all lawful requirements of the Director of the Division of Insurance. When there are 2 or more obligors on the loan contract, only one charge for credit life insurance and credit accident and health insurance may be made and only one of the obligors need be required to be insured, except that joint credit insurance may cover 2 obligors. Insurance obtained from, by, or through a licensee shall be in effect when the loan is transacted. The purchase of insurance through the licensee or from an agent, broker, or insurer specified by the licensee shall not be a condition precedent to the granting of the loan.

Section 120. Property insurance.

(a) A licensee may require the obligor to provide property damage insurance on real and personal property, all or part of which serves as security, against reasonable risks of loss, damage, and destruction in connection with loans exceeding an original principal amount of $500. The amount and term of the insurance shall be reasonable in relation to the amount and term of the loan contract and the type and value of the property, and the insurance shall be procured in accordance with the insurance laws of this State. The purchase of insurance through the licensee or from an agent, broker, or insurer specified by the licensee shall not be a condition precedent to the granting of the loan. The premium charged shall not exceed that charged by the insurance company.

(b) If the obligor fails to furnish evidence that he or she has procured insurance on the property, the licensee may purchase substitute insurance that may be substantially equivalent to or more limited than coverage the obligor is required to maintain. Such insurance must comply with the Collateral Protection Act.

Section 125. Extra charges prohibited. No amount in addition to the charges authorized by this Act shall be directly or indirectly charged, contracted for, or received, except: (i) lawful fees paid to any public officer or agency to record, file, or release security; (ii) costs and disbursements actually incurred in connection with a real estate loan, for any title insurance, title examination, abstract of title, survey, or appraisal, or paid to a trustee in connection with a trust deed; (iii) charges authorized by Section 4.1a of the Interest Act in connection with a real estate loan, whether called "points" or otherwise, that are imposed as a condition of making the loan and are not refundable in the event of prepayment of the loan; (iv) costs and disbursements, including reasonable attorney's fees, incurred in legal proceedings to collect a loan or to realize on a security after default; and (v) 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. This Section does not prohibit the receipt of a commission, dividend, charge, or other benefit by the licensee or by an employee, affiliate, or associate of the licensee from the insurance permitted by Sections 115 and 120 of this Act or from insurance in lieu of perfecting a security interest, provided that the premiums for the insurance do not exceed the fees that otherwise could be contracted for by the licensee under this Section. Obtaining any of the items referred to in clause (ii) of this Section through the licensee or from any person specified by the licensee shall not be a condition precedent to the granting of the loan.

Section 130. Disclosure of terms of contract. In any loan transaction under this Act, the licensee must disclose all of the following items to the obligor of the loan before the transaction is consummated:

(1) The amount and date of the loan contract.

(2) The original principal amount of the loan.

(3) Any deduction from the loan made by the licensee for any purpose prior to the loan being transferred to the obligor.

(4) Any payment made by the obligor in connection with obtaining the loan.

(5) The date on which the finance charge begins to accrue, if different from the date of the transaction.

(6) The total amount of the loan charge with a description of each amount included using the term "finance charge".

(7) The finance charge expressed as an annual percentage rate using the term "annual percentage rate". "Annual percentage rate" means the nominal annual percentage rate of finance charge determined in accordance with the actuarial method of computation with an accuracy at least to the nearest 1/4 of 1% or, at the option of the licensee, by application of the United States rule so that it may be disclosed with an accuracy at least to the nearest 1/4 of 1%.

(8) For all payday loans, the fact that a post-dated check may be presented to a financial institution for payment in full on the date for which it has been made out.

(9) The number, amount, and due dates or periods of payments scheduled to repay the loan and the sum of such payments using the term "total of payments".

(10) The amount or method of computing the amount of any default, delinquency, or similar charges payable in the event of late payments.

(11) The right of the obligor to prepay the loan in full on any installment date and the fact that such prepayment in full will reduce the insurance charge for the loan.

(12) A description or identification of the type of any security interest held or to be retained or acquired by the licensee in connection with the loan and a clear identification of the property to which the security interest relates. If after-acquired property will be subject to the security interest or if other or future indebtedness is or may be secured by any such property, this fact shall be clearly set forth in conjunction with the description or identification of the type of security interest held, retained, or acquired.

(13) A description of any penalty charge that may be imposed by the licensee for prepayment of the principal of the obligation with an explanation of the method of computation of the penalty and the conditions under which it may be imposed.

(14) Identification and description of the method of computing any unearned portion of the finance charge in the event of prepayment of the loan, and, if the licensee uses the "Rule of 78ths" method, a statement explaining that method substantially as follows:

Unearned finance charges under the Rule of 78ths are computed by calculating for all fully unexpired monthly installment periods, as originally scheduled or deferred, which follow the day of prepayment, the portion of the precomputed interest that bears the same ratio to the total precomputed interest as the balances scheduled to be outstanding during that monthly installment period bear to the sum of all scheduled monthly outstanding balances originally contracted for.

The description shall also include an example of its application solely for purposes of illustration in substantially the following form:

PREPAYMENT - "RULE OF 78THS" Unearned Original Sum of balances due every month after

prepayment

= X ___________________________________ Charge Charge* Sum of balances due every month of

contract

*for Finance Charge (excluding any charges added for a first payment period of more than one month) or credit insurance charges.

Example: 12 monthly payments of $10 (balance is $120 1st month, $110 2nd month, and so on), $20 Finance Charge. If 5 payments are prepaid in full, unearned Finance Charge is:

50+40+30+20+10

$20 x _________________________________ =$3.85

120+110+100+90+80+70+60+50+40+30+20+10

The terms "finance charge" and "annual percentage rate" shall be printed more conspicuously than other terminology required by this Section.

At the time disclosures are made, the licensee shall deliver to the obligor a duplicate of the instrument or statement by which the required disclosures are made and on which the licensee and obligor are identified and their addresses stated. All of the disclosures shall be made clearly, conspicuously and in meaningful sequence and made together on either:

(i) the note or other instrument evidencing the obligation. If a creditor elects to combine disclosures with the contract, security agreement, and evidence of a transaction in a single document, the disclosures required under this Section shall be made on the face of the document, on the reverse side, or on both sides; provided that the amount of the finance charge and the annual percentage rate shall appear on the face of the document, and, if the reverse side is used, the printing on both sides of the document shall be equally clear and conspicuous, both sides shall contain the following statement: "NOTICE: See other side for important information", and a place for the obligor's signature shall be provided following the full content of the document; or

(ii) One side of a separate statement that identifies the transaction.

The amount of the finance charge shall be the sum of all charges, payable directly or indirectly by the obligor, and imposed directly or indirectly by the licensee as an incident to or as a condition to the extension of credit, whether paid or payable by the obligor, by any other person on behalf of the obligor, to the licensee, or to a third party, including any of the following types of charges:

(A) Interest, time price differential, and any amount payable under a discount or other system of additional charges.

(B) Service, transaction, activity, or carrying charge.

(C) Loan fee, points, finder's fee, or similar charge.

(D) Fee for an appraisal, investigation, or credit report.

(E) Charges or premiums for credit life, accident, health, or loss of income insurance, written in connection with any credit transaction, unless:

(a) the insurance coverage is not required by the licensee and this fact is clearly and conspicuously disclosed in writing to the obligor; and

(b) any obligor desiring the insurance coverage gives specific dated and separately signed affirmative written indication of that desire after receiving written disclosure of the cost of the insurance.

(F) Charges or premiums for insurance, written in connection with any credit transaction, against loss of or damage to property or against liability arising out of the ownership or use of property, unless a clear, conspicuous, and specific statement in writing is furnished by the licensee to the obligor setting forth the cost of the insurance if obtained from or through the licensee and stating that the obligor may choose the person through which the insurance is to be obtained.

(G) Premium or other charge for any other guarantee or insurance protecting the licensee against the obligor's default or other credit loss.

(H) Any charge imposed by a licensee upon another licensee for purchasing or accepting an obligation of an obligor if the obligor is required to pay any part of that charge in cash, as an addition to the obligation, or as a deduction from the proceeds of the obligation.

(15) A late payment, delinquency, default, reinstatement, or other charge is not a finance charge if imposed for actual unanticipated late payment, delinquency, default, or other occurrence.

(16) A licensee who complies with the federal Truth in Lending Act and any regulations issued under that Act is deemed to be in compliance with the provisions of this Section, except with respect to the disclosure in item (14), which may be set forth in any manner.

Section 135. No real estate security. A licensee shall not take any security interest in real estate, except a lien which results from obtaining a judgement.

Section 140. Maximum term and amount. The loan contract shall provide for repayment of the principal and charges within 92 days from the date of the loan contract. No licensee shall furnish, loan, or otherwise provide an additional sum of money to any obligor under any circumstances during, on, or within 24 hours after the expiration of the loan contract. Any contractual agreement entered into by the licensee and the obligor with respect to the transfer of money in violation of this Section is null and void. No licensee shall permit an obligor to owe any licensee, any affiliate of a licensee (including a corporation owned or managed by the licensee), or any agent of any licensee an aggregate principal amount of more than $1,000 at any time for loans transacted pursuant to this Act.

Section 145. Advertising.

(a) Advertising for loans transacted under this Act may not be false, misleading, or deceptive. Advertising that states a rate or amount of charge for a loan must state the rate as an annual percentage rate. No licensee may advertise in any manner that indicates or implies that its interest rates or charges for loans are in any way "recommended", "approved", "set", or "established" by the State or by this Act.

(b) If any advertisement to which this Section applies states the amount of any installment payment, the dollar amount of any finance charge, or the number of installments or the period of repayment, then the advertisement shall state all of the following items:

(1) The amount of the loan.

(2) The number, amount, and due dates or period of payments scheduled to repay the indebtedness if the credit is extended.

(3) The rate of the finance charge expressed as an annual percentage rate.

Section 150. Incentives. A licensee may not pay money or any other thing of value to any person as an incentive or inducement to apply for a loan, to borrow money, or to refer potential borrowers to the licensee.

Section 155. Redemption of repossessed vehicle; transfer of certificate of title. Where the licensee repossesses a motor vehicle that was used as collateral and which is used primarily for the obligor's personal, family, or household purposes, the licensee shall be subject to the requirements of and shall transfer the certificate of title pursuant to Section 3-114 of the Illinois Vehicle Code.

Section 160. Collections; disciplinary action. Licensees and their contractors are bound by the Collection Agency Act and are liable for disciplinary action, including refusal to issue a license, refusal to renew a license, revocation of license, suspension of license, probation, reprimand, or any other disciplinary action the Director deems proper, including fines not to exceed $1,000 per licensee per complaint, for any act or omission that constitutes a violation of Section 9 of the Collection Agency Act.

Section 165. Collections; elderly or disabled persons.

(a) If a licensee violates Section 9 of the Collection Agency Act and if the victim of the violation is an elderly person or disabled person, the licensee is guilty of a Class A misdemeanor. For purposes of this Section, "elderly person" means a person 60 years of age or older and "disabled person" means a person who suffers from a permanent physical or mental impairment resulting from disease, injury, functional disorder, or congenital condition.

(b) The fine for a Class A misdemeanor committed under this Section shall not exceed $10,000.

Section 170. Payday lending; threat of criminal prosecution. No licensee or contractor for any licensee shall at any time communicate with any obligor to threaten the obligor with criminal prosecution, criminal conviction, or criminal sentencing if the alleged criminal act upon which the threat is predicated is the act of writing a postdated personal check that is not made good by the obligor at the time and date written on the check.

Section 175. Penalties for violation.

(a) Any person who engages in business as a short-term lender without the license required by this Act is guilty of a Class 4 felony.

(b) The obligor, prior to the expiration of 2 years after the date of his or her last scheduled payment, may recover any reasonable attorney's fees and court costs that a court assesses against any licensee or lender for a violation of Section 10, 95, 110, 115, 120, 125, 130, 140, 145, 155, 160, 165, or 170. The balance due under the terms of the loan contract shall be reduced by the amount that the obligor is thus entitled to recover. A bona fide error by a licensee in calculating charges or rebates is not a violation if the licensee corrects the error within a reasonable time after discovery.

(c) A license issued under this Act may be revoked if the licensee or any directors, managers of a limited liability company, partners, or officers of the licensee are convicted of a felony.

(d) 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 Director, if, after the act or omission occurs, the 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 Chief Counsel of the Division of Financial Institutions and approved by the Director.

Section 180. Cease and desist.

(a) The Director may issue a cease and desist order to any licensee or any person doing business without the required license that the Director determines is violating or is about to violate any provision of this Act or any rule imposed in writing by the Director as a condition of granting any authorization permitted by this Act. The Director may issue a cease and desist order prior to a hearing.

(b) The Director shall serve notice of the cease and desist order, including a statement of the reasons for the order, 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.

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

(d) The Director shall schedule the hearing within 30 days after the request for a hearing is made unless the parties agree otherwise.

(e) The Director shall prescribe rules necessary for the administration of this Section.

(f) If it is determined at the hearing that the Director had the authority to issue the cease and desist order, the Director may issue any orders reasonably necessary to correct, eliminate, or remedy the conduct that resulted in the issuance of the order.

(g) The powers vested in the Director under this Section are in addition to any and 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 powers and remedies conferred in this Section instead of or as a condition precedent to the exercise of any other power or remedy vested in the Director.

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

Section 185. Civil action. A claim of violation of this Act may be asserted in a civil action.

Section 190. Scope of Act. This Act does not apply to licensees under the Consumer Installment Loan Act making loans of more than $1,000 of any duration or loans of any amount with a term of 93 days or longer, any person, partnership, association, limited liability company, or corporation doing business under and as permitted by any law of this State or of the United States relating to banks, savings and loan associations, savings banks, or credit unions, or licensees under the Residential Mortgage License Act of 1987 for residential mortgage loans made pursuant to that Act. This Act does not apply to business loans.

Section 195. Rules. The Director may make and enforce any reasonable rules, orders, decisions, and findings required for the execution and enforcement of the provisions of this Act. All rules shall be printed and copies of the printed rules mailed to all licensees.

Section 200. Judicial review. All final administrative decisions of the Director under this Act shall be subject to judicial review pursuant to the provisions of the Administrative Review Law.

Section 205. Injunction; civil penalty; 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 promulgated 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 of up to $1,000 along with costs and attorney's fees.

Section 210. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 215. Applicability. This Act shall not apply to any contract or transaction made before January 1, 2006.

Section 295. The Financial Institutions Code is amended by changing Section 8 as follows:

(20 ILCS 1205/8) (from Ch. 17, par. 109)

Sec. 8. The Director shall direct and supervise all Department administrative and technical activities, in addition to the duties imposed upon him elsewhere in this Code, and shall:

(1) Apply and carry out this Code and the laws and all rules adopted in pursuance thereof.

(2) Appoint, subject to the provisions of the Personnel Code, such employees of the Department and such experts and special assistants as may be necessary to carry out effectively the provisions of this Code.

(3) Foster and develop programs with financial institutions, for the best interests of these institutions, their services and the people of the State of Illinois.

(4) Attend meetings of the Advisory Boards created by laws relating to financial institutions.

(5) Make continuous studies and report his recommendations to the Governor for the improvement of the Department.

(6) Make an annual report regarding the work of the Department and such special reports as he may consider desirable to the Governor, or as the Governor may request.

(6.5) Operate an electronic consumer complaint reception service by telephone, computer, or any other means that the Director finds appropriate to receive and compile complaints from consumers concerning the operations of licensees under the Short-term Loan Act.

(7) Perform any other lawful acts which he may consider necessary or desirable to carry out the purposes and provisions of this Law.

(Source: Laws 1957, p. 369.)

Section 297. The Consumer Fraud and Deceptive Business Practices Act is amended by changing Section 2E as follows:

(815 ILCS 505/2E) (from Ch. 121 1/2, par. 262E)

Sec. 2E. Any person who is regularly engaged in the business of providing or furnishing merchandise to consumers or in making loans to consumers and who has committed in any calendar year 3 or more violations, as determined in any civil or criminal proceeding, of the "Consumer Finance Act"; the "Consumer Installment Loan Act, "; the "Retail Installment Sales Act, "; the "Motor Vehicle Retail Installment Sales Act, the Interest Act, the Illinois Wage Assignment Act, the Short-term Loan Act, "; "An Act to revise the law in relation to the rate of interest and to repeal certain acts therein named", approved May 24, 1879, as amended; "An Act to promote the welfare of wage-earners by regulating the assignment of wages, and prescribing a penalty for the violation thereof", approved July 1, 1935, as amended; or Part 8 of Article XII of the Code of Civil Procedure, as amended, or of any 2 or more of those Acts, is guilty of an unlawful practice within the meaning of this Act. Nothing in this Section prohibits the prosecution of a person under the Acts specified herein as well as under this Act.

(Source: P.A. 82-783.)

Section 999. Effective date. This Act takes effect January 1, 2006.