093_HB1636

 
                                     LRB093 05267 JLS 05357 b

 1        AN ACT creating the Short-term Loan Act.

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

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

 6        Section 5. Definitions.
 7        "Check"   means  a  check,  draft,  or  other  negotiable
 8    instrument used for payment of money.
 9        "Department"   means   the   Department   of    Financial
10    Institutions.
11        "Director"  means  the  Director  of  the  Department  of
12    Financial Institutions.
13        "Interest bearing loan" means a loan in which the debt is
14    expressed  as  a  principal  amount  plus interest charged on
15    actual  unpaid  principal  balances  for  the  time  actually
16    outstanding.
17        "Lender" means an entity making  loans  subject  to  this
18    Act.
19        "Short-term loan" means a loan that:
20             (1)  is  made  by  a  lender  that  does  not accept
21        insured deposits;
22             (2)  is secured by a  post-dated  check  or  by  the
23        title to a motor vehicle; and
24             (3)  has  a  term  of  not more than 30 days or upon
25        which interest is charged at an  annual  percentage  rate
26        exceeding 36%.

27        Section 10.  Contractual disclosures and prohibitions.
28        (a)  A   short-term   loan   contract  must  provide  all
29    disclosures  required  by  Regulation  Z   of   the   Federal
30    Truth-In-Lending  Act.   A copy of all loan documents must be
 
                            -2-      LRB093 05267 JLS 05357 b
 1    given to the borrower.
 2        (b)  Before entering into a short-term loan agreement,  a
 3    lender  must  give  to the borrower a pamphlet describing the
 4    borrower's rights and responsibilities in the transaction and
 5    providing a toll-free number through which the  borrower  can
 6    contact  the  Department  of Financial Institutions regarding
 7    questions and complaints.
 8        (c)  A  lender  may  not  provide  for   arbitration   or
 9    mediation  in a venue other than the county in which the loan
10    was made. A loan contract  may  not  contain  a  cognovit  or
11    confession  of  judgement  clause  or provision. A short-term
12    loan may not require the borrower to deposit a set of vehicle
13    keys with the lender or an agent of the lender as a condition
14    of, or incident to, the loan. A loan contract must advise the
15    borrower that matters involving improprieties in  the  making
16    of  the  loan or in loan collection practices may be referred
17    to  the  Department  and  shall   prominently   display   the
18    Department's  address  and telephone number. A lender may not
19    take possession of a motor vehicle for  a  loan  default  and
20    lease  the vehicle back to the borrower. Any appraisal of the
21    value of a motor vehicle that has been used to secure a  loan
22    shall  be  limited  to the vehicle's Kelly Blue Book Used Car
23    Guide value.

24        Section 15.  Debt management service; notice.
25        (a)  At the time a lender conveys a notice to a  borrower
26    indicating  the  borrower  is  in arrears or in default for a
27    legally constituted debt issued by the lender under this Act,
28    the  lender  shall  include  with  the  notice  a   statement
29    indicating  the  toll-free telephone number of the Department
30    of Financial Institutions which the borrower may contact  for
31    the  purpose  of  the borrower receiving information from the
32    Department on how to contact a debt  management  service  for
33    assistance  in  resolving debt problems of the borrower.  The
 
                            -3-      LRB093 05267 JLS 05357 b
 1    form and method of the notice provided by licensees shall  be
 2    subject to approval by the Department.
 3        (b)  The  Department must establish a toll-free telephone
 4    number as provided by subsection (a) of this  Section.   This
 5    toll-free  number  may  be  the  same as that disclosed under
 6    subsection (b) of  Section  10.   The  Department  shall,  in
 7    cooperation with an organization representing debt management
 8    services,  establish  a  listing  of  debt management service
 9    offices that the Department shall provide  to  borrowers  who
10    are requesting the services of those offices.  The Department
11    shall  provide the list on an approximate geographic basis as
12    that relates to the borrower's residence.
13        (c)  The Department, in cooperation with an  organization
14    representing debt management services, shall prepare a notice
15    that  describes  the  services  provided  by  debt management
16    services.  The notice shall include  the  address,  telephone
17    number,  and  general  area  served  by  all  debt management
18    services  in  Illinois.   The  notice  shall  be  prominently
19    displayed by all lenders making loans under this Act.
20        (d)  When a loan made under this Act is  refinanced,  the
21    lender  shall  provide  to the borrower a copy of a statement
22    that contains the information set forth in subsection (c)  of
23    this  Section.   The  statement  shall  be  provided  to  the
24    borrower separately from the loan refinancing contract at the
25    time the loan refinancing contract is signed by the borrower.
26        (e)  Each  loan refinancing contract executed by a lender
27    shall include a statement, which shall be  initialed  by  the
28    borrower, as follows:
29        "I  have  received from (name of lender) a statement that
30    discloses information about debt management services and  the
31    address  and  telephone number of the debt management service
32    nearest my residence.".
33        (f)  The Department shall adopt rules  to  implement  the
34    requirements  of  this  Section.  For  the  purposes  of this
 
                            -4-      LRB093 05267 JLS 05357 b
 1    Section "debt management service" has the meaning given  that
 2    term in the Debt Management Service Act.

 3        Section  99.  Effective  date. This Act takes effect upon
 4    becoming law.