HB4603 97TH GENERAL ASSEMBLY

LRB097 18014 JLS 63237 b

97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB4603

Introduced 2/1/2012, by Rep. Naomi D. Jakobsson

SYNOPSIS AS INTRODUCED:

205 ILCS 670/15	from Ch. 17, par. 5415
205 ILCS 670/17	from Ch. 17, par. 5423
205 ILCS 670/19.3 new

Amends the Consumer Installment Loan Act in relation to title-secured loans. Limits interest on title-secured loans to 36% per year. Provides that the term of a title-secured loan may not be less than 4, nor more than 12, months. Prohibits repossession of a vehicle securing a title-secured loan after an amount equal to 100% of the principal has been repaid. Requires a licensee under the Act to comply with the Fair Debt Collection Practices Act. Prohibits the debiting of bank accounts in connection with title-secured loans and prohibits the making of title-secured loans with respect to motor vehicles that are titled in a state other than Illinois or owned by an obligor who is not a resident of Illinois.

A BILL FOR

AN ACT concerning business.

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

Section 5. The Consumer Installment Loan Act is amended by changing Sections 15 and 17 and by adding Section 19.3 as follows:

(205 ILCS 670/15) (from Ch. 17, par. 5415)

Sec. 15. Charges permitted.

(a) Every licensee may lend a principal amount not exceeding $40,000 and, except as to small consumer loans as defined in this Section, may charge, contract for and receive thereon interest at an annual percentage rate of no more than 36%, subject to the provisions of this Act. The ; provided, however, that the limitation on the annual percentage rate contained in this subsection (a) applies does not apply to title-secured loans, which are loans upon which interest is charged at an annual percentage rate not exceeding 36%, in which, at commencement, an obligor provides to the licensee, as security for the loan, physical possession of the obligor's title to a motor vehicle, and upon which a licensee may charge, contract for, and receive thereon interest at the rate agreed upon by the licensee and borrower. For purposes of this Section, the annual percentage rate shall be calculated in accordance with the federal Truth in Lending 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, for loans other than small consumer loans as defined in this Section, 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. With respect to a small consumer loan, the applicable interest for any installment period is that portion of the precomputed monthly installment account handling charge attributable to the installment period calculated based on a method at least as favorable to the consumer as the actuarial method, as defined by the federal Truth in Lending Act.

"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.

"Small consumer loan" means a loan upon which interest is charged at an annual percentage rate exceeding 36% and with an amount financed of $4,000 or less. "Small consumer loan" does not include a title-secured loan as defined by subsection (a) of this Section or a payday loan as defined by the Payday Loan Reform Act.

(c) Loans may be interest-bearing or precomputed.

(d) To compute time for either interest-bearing or precomputed loans for the calculation of interest and other purposes, a month shall be a calendar month and a day shall be considered 1/30th of a month when calculation is made for a fraction of a month. A month shall be 1/12th of a year. A calendar month is that period from a given date in one month to the same numbered date in the following month, and if there is no same numbered date, to the last day of the following month. When a period of time includes a month and a fraction of a month, the fraction of the month is considered to follow the whole month. In the alternative, for interest-bearing loans, the licensee may charge interest at the rate of 1/365th of the agreed annual rate for each day actually elapsed.

(d-5) No licensee or other person may condition an extension of credit to a consumer on the consumer's repayment by preauthorized electronic fund transfers. Payment options, including, but not limited to, electronic fund transfers and Automatic Clearing House (ACH) transactions may be offered to consumers as a choice and method of payment chosen by the consumer.

(e) 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 however, 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. However, if part or all of the consideration for a new loan contract is the unpaid principal balance of a prior loan, then the principal amount payable under the new loan contract may include any unpaid interest which has accrued. The unpaid principal balance of a precomputed loan is the balance due after refund or credit of unearned interest as provided in paragraph (f), clause (3). The resulting loan contract shall be deemed a new and separate loan transaction for all purposes.

(3) Loans must be fully amortizing and be repayable in substantially equal and consecutive weekly, biweekly, semimonthly, or monthly installments. Notwithstanding this requirement, rates may vary according to 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.

(f) With respect to precomputed loans:

(1) Loans shall be repayable in substantially equal and consecutive weekly, biweekly, semimonthly, or monthly installments of principal and interest combined, except that the first installment period may be longer than one month by not more than 15 days, and the first installment payment amount may be larger than the remaining payments by the amount of interest charged for the extra days; and provided further that monthly installment payment dates may be omitted to accommodate borrowers with seasonal income.

(2) Payments may be applied to the combined total of principal and precomputed interest until the loan is fully paid. Payments shall be applied in the order in which they become due, except that any insurance proceeds received as a result of any claim made on any insurance, unless sufficient to prepay the contract in full, may be applied to the unpaid installments of the total of payments in inverse order.

(3) When any loan contract is paid in full by cash, renewal or refinancing, or a new loan, one month or more before the final installment due date, a licensee shall refund or credit the obligor with the total of the applicable interest for all fully unexpired installment periods, as originally scheduled or as deferred, which follow the day of prepayment; provided, if the prepayment occurs prior to the first installment due date, the licensee may retain 1/30 of the applicable interest for a first installment period of one month for each day from the date of the loan to the date of prepayment, and shall refund or credit the obligor with the balance of the total interest contracted for. If the maturity of the loan is accelerated for any reason and judgment is entered, the licensee shall credit the borrower with the same refund as if prepayment in full had been made on the date the judgement is entered.

(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 or collection charge may be collected on any installment regardless of the period during which it remains in default.

(5) If the parties agree in writing, either in the loan contract or in a subsequent agreement, to a deferment of wholly unpaid installments, a licensee may grant a deferment and may collect a deferment charge as provided in this Section. A deferment postpones the scheduled due date of the earliest unpaid installment and all subsequent installments as originally scheduled, or as previously deferred, for a period equal to the deferment period. The deferment period is that period during which no installment is scheduled to be paid by reason of the deferment. The deferment charge for a one month period may not exceed the applicable interest for the installment period immediately following the due date of the last undeferred payment. A proportionate charge may be made for deferment for periods of more or less than one month. A deferment charge is earned pro rata during the deferment period and is fully earned on the last day of the deferment period. Should a loan be prepaid in full during a deferment period, the licensee shall credit to the obligor a refund of the unearned deferment charge in addition to any other refund or credit made for prepayment of the loan in full.

(6) If two or more installments are delinquent one full month or more on any due date, and if the contract so provides, the licensee may reduce the unpaid balance by the refund credit which would be required for prepayment in full on the due date of the most recent maturing installment in default. Thereafter, and in lieu of any other default or deferment charges, the agreed rate of interest or, in the case of small consumer loans, interest at the rate of 18% per annum, may be charged on the unpaid balance until fully paid.

(7) Fifteen days after the final installment as originally scheduled or deferred, the licensee, for any loan contract which has not previously been converted to interest-bearing under paragraph (f), clause (6), may compute and charge interest on any balance remaining unpaid, including unpaid default or deferment charges, at the agreed rate of interest or, in the case of small consumer loans, interest at the rate of 18% per annum, until fully paid. At the time of payment of said final installment, the licensee shall give notice to the obligor stating any amounts unpaid.

(Source: P.A. 96-936, eff. 3-21-11.)

(205 ILCS 670/17) (from Ch. 17, par. 5423)

Sec. 17. Maximum term and amount.

(a) Except as provided in subsection (b), the The loan contract shall provide for repayment of the principal and charges within 181 months from the date of the loan contract or the last advance, if any, required by the loan contract. No licensee shall permit an obligor to owe such licensee or an affiliate (including a corporation owned or managed by the licensee) or agent of such licensee an aggregate principal amount of more than $40,000 at any time for loans transacted pursuant to this Act.

(b) A contract for a title-secured loan may provide for repayment of the principal and charges within no fewer than 4 months, and no more than 12 months, from the date of the loan contract.

(Source: P.A. 93-264, eff. 1-1-04.)

(205 ILCS 670/19.3 new)

Sec. 19.3. Title-secured loans; procedures.

(a) A licensee may not repossess a motor vehicle used as collateral for a title-secured loan at any time after the obligor has repaid an amount equal to 100% of the principal loan amount.

(b) A licensee must comply with the Fair Debt Collection Practices Act. A licensee may not debit bank accounts in connection with a title-secured loan. A licensee may not accept as security for a title-secured loan any motor vehicle at any time during which the motor vehicle is subject to an outstanding lien. A licensee may not accept as security for a title-secured loan any motor vehicle the title of which is issued by a state other than Illinois or that is owned by an obligor who is not a resident of this State.